Expert Analysis of Today's Market

• The dollar traded lower against most key currencies on Friday as the September US employment data rose in line with expectations but the August non-farm payrolls number was revised sharply higher. The Canadian dollar rose to a 31-year high after a report showed Canadian job growth accelerated and unemployment fell to a 3-decade low. The aussie rose to a 23-year high on increasing speculation Australia’s interest-rate advantage over the US will widen.


• The EUR/USD was little changed on better-than-forecast US job growth. The pair shows a sign of a short-term peak as the 6-week bull-trend was broken. However, we expect more volatility in the pair.

Financial and Economic News and Comments

US & Canada

• US non-farm payrolls rose 110K in September, the Labor Department said. August’s number was revised to an 89K rise from a previous estimate of a 4K decline. That drop had been seen as a catalyst in the Fed’s surprisingly aggressive half-point federal funds reduction last month, its first in over 4 years. The numbers indicate US job growth is slowing but not as much as earlier reported.

• The US unemployment rate rose to 4.7% in September from 4.6% in August and a cycle low of 4.4% in March. This is a warning sign as higher unemployment is a leading indicator of recessions.

• Canada’s employment rose 51,100 jobs September after rising 23,300 in August, and unemployment fell to a record low of 5.9%, Statistics Canada said.

Europe

• After signaling it is in no hurry to raise interest rates, the European Central Bank today said it will be harder for European companies and consumers to borrow money in the next 3 months after the US subprime-mortgage slump increased the credit cost. The ECB said the recent credit-market turmoil “may hamper funding.” In the October 2007 bank lending survey published today, the ECB said European banks reported tightened credit standards in the third quarter. “Looking ahead to the fourth quarter of 2007, banks expect a further net tightening of credit standards applied on loans to enterprises….Demand for loans by enterprises is expected to remain positive, although less than in the previous quarter,” the ECB said in today’s bank lending survey. Banks expect “a further net tightening of credit standards” for home purchases in the fourth quarter and conditions for consumers are expected to “tighten considerably,” the ECB said.

Asia-Pacific

• Japan’s leading economic indicators index fell to 100.6 in August while the coincident index rose to 114.6, the Cabinet Office said. The volatile diffusion index plunged to 30. Overall, the numbers signal a slowing Japanese economy.

FX Strategy Update