UK unemployment surprised to the upside with claimant count dropping by -13,700  versus forecasts of 4,900 gain. The unemployment rate dropped to 8.2% from 8.3% the month prior. This was the fastest pace of job growth in nine months indicating that UK labor markets remain relatively buoyant despite broader economic slowdown in UK. 

   After plumbing fresh lows in Asian session trade risk FX bounced in midmorning European dealing on speculation that Greece may cobble together a working coalition government without resorting to another Parliamentary election. Earlier in the session weak Chinese economic data and a massive unexpected loss from JP Morgan kept risk FX under pressure with EUR/USD coming within a few points of the 1.2900 barrier while Aussie drifted lower towards parity. JP Morgan reported a trading loss of more than -2 Billion dollars in credit derivatives as a result of hedge gone wrong by its CIO office in London. 

   After plumbing fresh lows in Asian session trade risk FX bounced in midmorning European dealing on speculation that Greece may cobble together a working coalition government without resorting to another Parliamentary election. Earlier in the session weak Chinese economic data and a massive unexpected loss from JP Morgan kept risk FX under pressure with EUR/USD coming within a few points of the 1.2900 barrier while Aussie drifted lower towards parity. JP Morgan reported a trading loss of more than -2 Billion dollars in credit derivatives as a result of hedge gone wrong by its CIO office in London. 

  After obsessing about Greece for most of the week, there is finally some fresh and important data to draw our attention away from the country’s political drama. Even though this distraction will only be temporary, for the next few hours, investors will be holding their breath in anticipation of China’s latest economic reports. Last night’s larger than expected Chinese trade surplus sent most of the major currencies sharply higher despite concerns about the level of import and export growth. Their trade surplus nearly doubled in the month of April from $9.9 billion to $18.4 billion. However export and import growth slowed materially, raising widespread concerns about the growth in China. Tonight inflation, industrial production and retail sales numbers are scheduled for release. Like many other central banks, the People’s Bank of China keeps a close eye on CPI. After rising from 3.2 to 3.6 percent in March, inflationary pressures are expected to have eased in April. If industrial production and retail sales growth slow as well, the PBoC could react with another Reserve Requirement Ratio cut in May or June. For the currency market, weaker data could renew demand for safe haven currencies such as the Yen and U.S. dollar while at the same time pressure commodity currencies such as the Aussie and kiwi. Stronger data would help boost risk appetite and allow the AUD and NZD to continue to recover.

  After four failed attempts over the past 3 months to close below 1.30, the EUR/USD finally did it. Continued concerns about Greece and renewed fears of funding problems for Spain drove the currency pair to its lowest levels in 3 months. This is the eighth consecutive trading day that the euro has failed to rally against the U.S. dollar and when it broke below 1.2955, the selling pressure intensified quickly with the pair slipping to an intraday low of 1.2912. This psychologically significant level was once support and will now become resistance. Although U.S. stocks ended the day off their lows, the EUR/USD did not enjoy the same intraday recovery as some of its counterparts. 

Currencies and equities traded sharply lower today on the back of weaker non-farm payrolls. The U.S. dollar initially sold off against all of the major currencies but after the stock market opened for trading, risk aversion swept through the markets, forcing the euro to give up all of its earlier gains. The losses in commodity currencies intensified while USD/JPY broke below 80. The possibility of more stimulus was very negative for USD/JPY but softer U.S. growth hurts other countries too and for this reason, higher beta currencies sold off more aggressively than the greenback.

   Currencies were in their typical pre-NFP stall in quiet European trade with liquidity further hampered by the fact that today was the end of Golden Week holidays in Asia. Nevertheless mild risk aversion flows continued to weigh on the euro in the wake further evidence of deterioration of economic conditions in the Eurozone.  

  Final EZ PMI services printed even worse than the original flash estimate at 46.9 versus 47.9 putting further downward pressure on the euro at the start of morning European trade. The downturn in services was the largest drop since October of 2008 during the peak  of the credit crisis and suggests that economic conditions in the monetary union are deteriorating rapidly.