Week in FX Europe – NFP: Smoke and Mirrors For the EUR?

How bad is the US job participation rate? Throwing around a few numbers and assuming that the US participation rate stayed steady, analysts calculate that last months unemployment rate would actually rise to +7.55% instead of falling to Friday’s +7.3%. Smoke and mirrors? Difficult to say, but it certainly gives the perception that everything is on the “up.” What’s even more frightening is that if the participation rate rose in line with US demographics in the past five-years then the actual US unemployment rate would be just shy of +10%!

Friday’s numbers are best describing how “activeness in the US workforce has been key in shifting the country’s labor landscape.” The weaker than expected NFP report has helped the EUR for the time being. Even Putin’s comments that Russia will continue to sell weapons to Syria (sure to change over time) temporarily added direct pressure to the dollar and favored the safer-haven trade. Despite this market remaining long the dollar, it will be the markets view on, when Fed tapering actually occurs and how much, that will have the strongest influence on both the EUR and Emerging Market currency values going forward.

The Syria situation and the US employment fallout are sure to blind the markets until Obama addresses the nation on Tuesday. Less risky trades will favor the EUR, JPY and CHF on pullbacks.

• UK Manufacturing is Recovering But Still Hasn’t Offset Earlier Falls
• Merkel Not Afraid Ahead of German Elections
• Mario Monti Defends Berlusconi
• German Exports Fall Unexpectedly in July
• Greek Labor Unions Expect Job Recovery in 20 Years
• IMF Warns Nordic Countries on Housing Bubbles
• IMF and Eurogroup to Discuss 3rd Greek Bailout In November
• UK Borrowing Hits 3 Percent on 10 Year Gilts
• German Industry Orders Fall in July
• Global Equity Strategist See Flows Returning to Europe
• Mario Draghi Reiterates ECB Will Not Provide Further Bailouts to Greece
• UK Car Sales Continue to Rise
• Bank of England Maintains Rate at 0.5%
• ECB Improves European Economic Outlook
• ECB’s Draghi to Talk Up Recovery but Talk Down Market Rates
• UK All Sector Services Index Reaches 15 Year High
• Spain Services Grow For First Time in 2 Years
• Euro Zone Business Activity Reaches Strongest Level in 2 Years
• Pollsters Love Merkel But Historically They Overestimate Voters by 7 Percent
• German Economic Rebound Does Not Carry Over To Europe
• Merkel Goes on the Offensive At Home Warns Voters That A Vote for the Competition Will Raise Taxes
• ECB On Track for Bank Supervision According to Asmussen
• Spain’s Unemployment Rate Steady at 26.3 Percent
• UK Manufacturing Continues to Impress
• European Corporate Earnings Expected To Climb Higher
• UK Housing Market Strongest Since 2007
• Italy First Of Many To Tax High Frequency Traders

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