USD – The dollar extended its recent gains against many of its peers this morning as investors focus on the continued general outperformance of the US economy.  Despite several weak successive readings of jobless claims following Hurricane Sandy, nonfarm payrolls came in nearly twice as high as expected at 146K versus 85K that was anticipated.  The surprising reading was led by a sharp jump in private payrolls as companies appear to be less concerned with the possible prohibitive effects of the so-called fiscal cliff than previously thought.  However, experts generally estimate that the economy needs to add 150K jobs each month just to keep pace with population growth and demographic changes. The November report gets a bit of a pass considering all the disruptive effects during the month, but future reports will have to show larger gains to markedly improve the overall outlook for the labor market.  In the meantime, the added jobs were enough to push the unemployment rate lower to 7.7%, down 0.2% from last month. While employers may be feeling a bit better about the outlook for the global economy, consumers remain unsure.  University of Michigan confidence came in far below forecast at 74.5 vs. 82.7 in the previous reading as Americans are clearly on edge about the ongoing fiscal debates on Capitol Hill.  Nevertheless, focus is clearly on the strong labor reports this morning, and this is in turn providing support for the dollar as the US economy continues to outperform many of its peers. 

EUR – The euro extended its declines overnight after the ECB kept interest rates on hold on Thursday. However, commentary after the release suggests that a majority of the ECB policymakers support further cuts if the economy does not turn a corner.  However, rates were kept on hold on concerns about the negative signal a cut might send as the Bank downwardly revised its growth and inflation forecasts.  Policymakers lowered their forecasts for Eurozone growth in 2013, now predicting a 0.3% contraction.  The central bank also estimated that inflation to will slow to 1.6% in 2013 and 1.4% in 2014.  The debt crisis that is weighing on the region as a whole is now also crimping growth in even the strongest regional economies. The Bundesbank cut its forecast for German growth next year to 0.4% from 1.6%.  Investors are thus opting for more stable assets this morning. However, the EUR/USD has found support at the convergence of the 50 and 200-day MAs near the key 1.29 handle.

GBP – The pound is mixed this morning, falling against the USD, but gaining on the EUR.  The pound extended its gains against the EUR as investors turned to the relative safety of British assets after the ECB and Bundesbank downgraded their outlook for Eurozone and German growth.  However, stagnant British economic fundamentals limit the pound’s appeal when compared against the USD and the general improvement seen in the US economy.

JPY – The yen traded through a particularly volatile overnight session after a magnitude 7.3 earthquake struck the island nation.  Despite an initial scare, it appears damage is limited. Nevertheless, investors are positioning for a possible appreciation after the yen soared to a post-WWII high in the wake of the 2011 earthquake, tsunami and ensuing nuclear catastrophe. 

Commodity Currencies – The commodity currencies are generally higher today despite mixed raw good prices. The CAD and MXN both strengthened in early trading after the encouraging jobs reports out of the US provides support.  Canada released a better-than-expected jobs report of their own with the economy adding 59.3K positions in November versus the 10.0K that were expected.  The report was enough to push the Canadian unemployment report down to 7.2% from 7.4%.  The AUD edged higher after a government report showed that RBA official reserves fell for the first time since August, dropping to $48.17B from $51.24B.  The Aussie has been contained within its recent narrow ranges for the past four weeks after RBA data showed that reserves increased by $4.2B in October, as policymakers tried to stave off further currency appreciation. 

 

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