Market Strategy Videos

Non Farm Payrolls Anticipation

On CNBC Squawk Box ACM Advanced Currency Markets Chief Market Analyst Peter Rosenstreich discusses the USD recession and the markets ability to stomach the negative US economic data.

RSS VIDEO FEED

Name: Peter Rosenstreich
Title: Chief Market Analyst
Company: Advanced Currency Markets
Date: 04/04/2008
Time: 07:33 CET
Channel: CNBC Europe
Duration: 3 mins 31 secs



Geoff Cutmore

Peter Rosenstreich joins us. He’s Chief Market Analyst at Advanced Currency Markets. Peter,
how do you think the dollar is poised going into this number?

Peter Rosenstreich

Well, I think the dollar is pretty much, like the last guy just said, really at a stable point, and the market’s waiting to see what happens at non-farm payroll today. There’s one side of the coinwhich is very optimistic that a lot of the weakness is already priced into the market and the dollar’s ready for a relatively strong rebound for Q2/Q3. However, there’s the other side of the coin where the market really hasn’t seen all the numbers that correspond with recession starting with the payrolls. Once they start seeing these negative numbers, exactly how much can traders really stomach. You have the two sides of the coin, and that’s really going to define – I think today’s number will really define which way the dollar moves in the weeks to come.

Martin Baccardax

Peter, are we seeing a bit of a head fake in the currency markets here? I mean, let’s face it; we have some dollar bulls in the market, but the dynamics from a fundamental point of view seem to be pushing the other pairs down. We have weak retail sales in the Eurozone and concerns about rate cuts, or at least anticipation of rate cuts. It’s a similar story in the United Kingdom. We have the end of the repatriation trade which is driving the yen back and maybe some carry trades putting back on, so maybe we’re not seeing dollar strength at this point; we’re just seeing currency weakness against the other pairs.

Peter Rosenstreich

Well, I think really what we’re seeing is market uncertainty. I mean from a trading standpoint, not from a volatility or risk standpoint. The market doesn’t quite know exactly which way it should turn. They don’t know if the Fed is going to go 25 or 50; it’s really on the line right there. They don’t know if that’s going to be the final hike coming from the FOMC. They don’t know if the historical lag in the Eurozone, the three month lag between the US and the Eurozone, is really going to come into effect this time and global growth really hit the Eurozone. These are – and like I said earlier, how much can the global trader stomach in terms of negative data coming from the US? It’s really at an odd point, and I think these payroll numbers are going to put a lot of that to rest right now. When we start seeing these negative 60 – 100,000 payroll jobs and the dollar
continues to appreciate, I think we’re going to start seeing a relatively prolonged dollar run.

Martin Baccardax

Of course, that does bring it back to the question probably against the most important pair: against the Euro. Are we looking at a situation where we could maybe get down to the 1.40s or the 1.45s in dollar/Euro if we assume that this lag you’re talking about is going to take traction and that the ECB will have to start to react maybe sometime in the third quarter?

Peter Rosenstreich

Absolutely. I think our official call is to head down to the 1.45 by Q3. That’s exactly the reason why we think we’re going to start seeing weakness in the Eurozone. We’re going to see the interest rate differentials tighten as the Eurozone moves into its easing cycle, as the Fed goes into sort of a hold period, and we’ll start seeing the dollar strengthen on that change of gradient, if you will. However, is that going to happen today? I still think that the numbers that correlate with the recession, traders are not really ready to stomach. I think that at the short term we’ll continue to see Euro/dollar moving up to the 1.57, 1.58 short term.

Geoff Cutmore

Peter, thanks very much for that. Peter Rosenstreich, Chief Market Analyst at Advanced
Currency Markets.