Fundamental Forecast

2/1/2008 3:50 PM: EUR/$..1.4798 $/JPY..106.57 GBP/$..1.9665 $/CHF..1.0888 AUD/$..0.9039 $/CAD..0.9934

USD Resilient to Dismal Payrolls by Korman Tam

The dollar shrugged off a dismal labor report in early Friday trading – slipping initially following the release, but rallying sharply after traders digested the news. The greenback fell just shy of a fresh all-time low against the euro at 1.4954 before surging to 1.4788 while pushing the sterling beneath the 1.97-level to 1.9655.

The non-farm payrolls for January unexpectedly contracted by 17k, considerably worse than calls for an increase of 80k – and shrinking from an 18k increase in payrolls in the previous month. The unemployment rate, however, improved to 4.9%, drifting from 5.0% a month earlier. Average earnings edged up by 0.2%, but down from 0.4% previously, while the average work week was marginally lower at 33.7 hours. Also released today were January manufacturing ISM, which defied estimates for a decline to 47.3 from 47.7, instead improving to 50.7 and the University of Michigan consumer sentiment survey, improving to 78.4 from 75.5.