There are two ways of looking at today’s unemployment report. The first is the notion that the rate of change of unemployment has slowed. The upward revision to the December report means that the number of people who lost their jobs eased into January and February. That leaves the unemployment rate at 8.1% today with 651,000 workers losing positions in the labor force last month. The other way of looking at this is that America’s employers are shedding an alarmingly steady number of workers as they face the worst depression since, well, the last one. That tells us that employers see the situation worsening rather than improving. The immediate reaction has been to sell the dollar with the euro regaining its poise at $1.2720 immediately after the release of today’s report.

Ultimately the dollar’s fate on any given day comes down to supply and demand, but we’re struggling with the collective message today. Hot on the heels of fresh multi-year lows across global equity market indices one would expect the non-farm payroll report to ice the cake and boost the dollar. There is very little solace to take away from the worst unemployment rate since 1983 and little reason to shy away from the buck.

One common explanation is that a big number today might be seen as flushing out the system leaving onlookers concluding that, surely it can’t get any worse. There was a similar reaction during October when the pace of the relentless equity market decline was such that bears had to temporarily stop growling. Prices rebounded before the onset could continue in January. Perhaps the risk/reward of shorting the euro at $1.2500 support is too much to ask right now.

While the dollar might have lost its short-term impetus as a risk aversion safe haven, today’s 8.1% rate of unemployment hastens the day or at the very least shortens the odds of reaching a 10% rate before long.

Some of today’s dollar losses could be attributed to traders’ wariness of going into the weekend long after trading patterns we observed on the past two Friday morning. Ahead of lunchtime on each occasion a large seller of dollars across the board drove down the dollar. Two weeks ago that caused a near three cent meltdown to exactly $1.30 against the euro, while last week’s selling was quickly absorbed as the dollar fought back.

The yen continues to gain ground against the dollar and after falling to ¥99.68 yesterday, it’s back at ¥97.63 today. Debate continues as to whether yen repatriation is done and whether the Japanese unit will lose its appeal as a safe haven. We continue to feel that more investors are seeing negative implications of the Japanese economy being strangled by the flight to safety, which ultimately means holding yen is a bad idea. Also with the precipitous equity market declines, the odds are that we’ll see a rebound as more and more bargain hunters scoop up stocks. The creation of recovery hopes will likely also weigh against the yen as the desire for safety diminishes.

The pound is reacting positively to Bank of England Governor King’s ‘groping in the dark’ comments. The Bank has been granted approval to print £150 billion to buy government debt or gilts with maturities ranging between 5-25 years in efforts to alleviate the balance sheets at the nation’s banks, which would potentially spur lending. Clearly, Thursday’s halving in the base rate of monetary policy, the Bank’s tool box is practically empty, which is why the authorities are exploring this new venture. The proof won’t be seen for several years, while some take the view that the ultimate result will be inflation if not hyper-inflation.

The kind of runaway inflation that some depict would be the result of too much money in the public hands. But when central banks are forced to resort to the printing presses, one has to look at where the money goes. If, like the Japanese did this week, the government began handing out money to spur consumption then we’d agree there is a chance that excessive inflationary pressures might arise. But when the money largely replaces the void of private sector financing, the result ought to have little impact on inflation. The pound is responding well and investors have either worked this out or are more willing to bear the risk that the latest move will improve rather than harm the output of the nation. The pound is higher at $1.4270 today and a little lower against a stronger euro at 89.06 pennies.