The Euro Whipped Into Frenzy By NFP

Includes: FXB, FXE, FXF, GLD, UDN, UUP
by: Dean Popplewell

Very little is going euro-policy maker's way these days. The last thing that the ECB or Draghi was looking for was a poor non-farm payroll print. Draghi's on and off again dovish press conference this week has left the market very much in the dark, and under the illusion that euro policy makers really do not have anything up their sleeves when it comes to some magical innovative process to ease monetary policy.

Friday's weak U.S. jobs report is perhaps telling the market to curtail its expectations for when the Fed will eventually wind down its bond purchases. This net effect should keep the EUR better bid over time, certainly something that the eurozone, especially the struggling peripheries, cannot afford given the current circumstances.

The EUR's initial climb after the ECB's Thursday press conference was most likely on relief that the ECB is perhaps considering other "unconventional" methods rather than a plain vanilla rate cut. The market does not seem to be too bright on what these unconventional methods could be. In the real world, there are only few alternatives to printing money and the most effective is rate manipulation. However, over time more printed money will only increase the domestic market monetary base and reduce the currency's value.

All this EUR strength cannot be blamed on the U.S. alone. A determined governor Kuroda's aggressive new easing program has the world and their mothers looking to sell yen aggressively outright and on the crosses.