From DailyFX.com, Friday, 02 November 2007 12:48:20 GMT
Non Farm payrolls for October printed much better than expected at 166,000 jobs versus 85,000 forecast, confirming earlier reports in the week that pointed to a rebound in the US labor markets. The unemployment rate remained the same at 4.7% as did the average weekly hours at 33.8. However, the one dark cloud in the report was the weaker than expected rise in average hourly earnings which increased only 3.8% versus 4.0% projected.
The news confirms the thesis that US economy remains remarkably resilient despite the woes in the housing and financial sectors and casts doubt on any additional easing by the Federal Reserve for the rest of the year. The dollar however, saw only a fleeting moment of strength as the currency market continues to be dominated by dollar bears skeptical of any positive US economic news.
As we noted in our morning piece, " We continue to believe that the EUR/USD is near the end of its current rally and while it may make another run at the 1.45 figure, any additional gains going forward are likely to be small and slow." At this point the EUR/USD is trading on pure momentum, driven by sheer speculative demand. Euro bulls may be counting on a hint of a possible year-end rate hike from the ECB at next week's rate announcement meeting but if no such signal is forthcoming from Mr. Trichet and company, the pair becomes vulnerable to a sharp sell off in the near future.
Written by Boris Schlossberg, Senior Currency Strategist
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