USD Resilient to Dismal Jobs

The major currency pairs stabilized from a choppy morning session, prompted by the release of the March employment report. The dollar initially sold-off following the dismal data, falling to 1.5773 against the euro and 2.0049 versus the sterling – but has since recovered with much of the gloom already priced into the currency.

The March jobs report revealed a third monthly contraction in non-farm payrolls, down by 80k versus an upwardly revised decline of 76k in February – its worst reading since March 2003. The unemployment rate for March was also worst than expectations, rising to 5.1% -- its highest level since 2005 and up from 4.8% a month earlier. The lackluster labor report reinforces our view for a 50-basis point rate cut from the FOMC when it meets to deliberate policy at the end of the month. The major equity bourses shrugged off the report, with the Dow Jones and Nasdaq both up slightly on the day.

Canada’s labor report revealed similar deterioration, with the unemployment rate in March climbing to 6.0% versus 5.8% a month earlier. The March employment change number fell to 14.6k, down considerably from the previous month at 43.3k.