Expert Analysis of Today's Market

• The dollar was little changed after Friday’s government report showed US non-farm payrolls fell 80,000 in March, the most in five years and the third monthly drop, with the unemployment rate surging to 5.1%, increasing the risk of a more severe recession. The Canadian dollar fell following an unexpected rise in the Canadian jobless rate to 6%. The yen strengthened on increased risk aversion.


• The EUR/USD rose after US job-loss figures substantiate the US economy is in a recession and further Fed interest-rate cuts are imminent. Recent developments indicate that the European economy is starting to slow, the European Central Bank will likely start its policy-easing in late-spring, and European politicians and finance ministers are trying to pressure the ECB to cut rates. These could pressure the EUR/USD regardless of the US economy going into a full-fledged recession. The pair is still between support from the uptrend and resistance from the all-time high. A break of support or resistance will determine the EUR/USD short-term direction.

Financial and Economic News and Comments

US & Canada

• US non-farm payrolls fell a larger-than-expected 80,000 in March, its biggest decline in five years, after falling 76,000 in both January and February, the Labor Department said. The unemployment rate rose 0.3 percentage point to 5.1%, the highest since September 2005, when it was also 5.1%. The figures indicate the US is in a recession. Globicus leading and coincident indicators show the recession may have started since late last year, likely to get more severe (see our March 28 report).

• The Canadian unemployment rate unexpectedly rose to 6% in March from a three-decade low of 5.8% in February and Canada added 14,600 jobs in March after adding 43,300 in February, Statistics Canada reported.


• Canadian business and government spending slowed in March. The Ivey purchasing managers’ index dropped to 59 in March from 62 in February.

Europe

• German manufacturing orders unexpectedly declined for a third month in February, indicating the German economy is starting to slow down. New orders, adjusted for seasonal swings and inflation, fell 0.5% m/m in February after dropping a revised 0.7% m/m in January, the Economy and Technology Ministry said.

Asia-Pacific

• The next Australian inflation rate is likely to be higher, approximately 4%, Reserve Bank of Australia Governor Glenn Stevens said in Sydney before the House of Representatives Standing Committee on Economics. “The pace of demand growth in 2007 well and truly exceeded any plausible estimate of the rate of growth of the economy’s supply potential. Under these demand conditions, inflation increased. Having apparently moderated a little late in 2006 and early 2007, it began to show higher readings around the middle of 2007 and by the end of the year had reached about 3½ per cent in underlying terms. Measured by the CPI, the year-ended inflation rate was 3 per cent, but as is well understood, the next figure is likely to be around 4 per cent,” Stevens stated.


• Australian retail sales unexpectedly fell for a second month in February, slipping 0.1% m/m, the Statistics Bureau said.

FX Strategy Update