On Friday, the euro continued its uptrend as a weaker-than-expected non-farm payrolls report increased the prospects of another round of quantitative easing from the US Federal Reserve at its meeting later this week.
After a much stronger-than-anticipated ADP private sector jobs report earlier in the week, there was an unspoken confidence (or at least hope) that there might have been some upside to the 130,000 consensus estimate for the non-farms report. The actual print of 96,000 was a clear disappointment as were the downwards revisions for the previous two months’ reports.
While the unemployment rate fell to 8.1% from 8.3%, no one was buying this statistic as ‘good news’, when in reality it signalled a shrinking workforce as disillusioned job seekers gave up looking. In recent weeks, Ben Bernanke has repeatedly linked the likelihood of more stimulus with the unemployment predicament. Friday’s weak report and the downwards revisions to the June and July reports could hardly be seen as the ’sustainable and substantial improvement‘ in the employment picture that the Fed had been hoping for.
While equities expressed a relatively neutral view on the report, the reactions of gold and the risk currencies were strong evidence the market now believes some sort of asset purchase programme from the Fed this week is almost a sure thing. Gold surged more than US$40 to US$1735 and the euro soared from the 1.2640s into the low 1.28s. In early Asian trade the euro is marginally off its US closing level to be currently at 1.2688.