First things first: Tomorrow is unemployment data day and this report will not be preceded by the CANADIAN release as our northern neighbors need an extra week to compile the data as February is a shortened month. The jobless claims and Thursday’s ADP data is driving up the non-farm payroll number from an early consensus of 175,000 to a whisper number above 250,000.
As usual, the AVERAGE HOURLY EARNINGS and THE WORK WEEK will be critical with AHE expected to come in at 0.2 percent and the work week to have increased by 0.1 percent. After two previous large drops in the unemployment rate to 9.0 percent, analysts are anticipating a slight rise to 9.2 percent as workers return to the job market. It is the rate that has painted the FED into a corner so the rate staying above 9.0 percent will certainly keep the FED FROZEN, even if the NFP is more than 300,000.
It certainly seems like this is going to be a big number as the PRIVATE SECTOR is hiring even as GOVERNMENT jobs at the STATE and MUNICIPAL level is being shed. Bernanke and his fellow doves are locked into the DUAL MANDATE MANTRA and will wait until employment growth begins to truly gain traction. Again, if the yield curve continues to steepen or maintains its historical steepness, the upward pressure on EQUITIES and downward pressure on the DOLLAR are totally rational responses. A dovish FED is the progenitor of rising asset prices. That is the hymnal that causes asset prices in a HALLELUJAH CHORUS.
To complete the week of central bank meetings, the ECB followed the RBA and the BOC and held rates steady. However, President Trichet gave the EURO currency a reason to rally as the ECB head hinted that APRIL would bring a rate rise. Trichet talked tough about rising inflation even as the sovereign debt markets in Europe continued to worry about some type of default. It is important to remember that Merkel faces tough elections in Germany at the end of March so it is not beyond Trichet throwing the hard money Germans a “JAWBONE.”
Chancellor Merkel is under great political pressure as she is seen caving in to the soft money, profligate crowd. If the ECB is seen as a staunch defender of the “HARD” EURO it may well buy Frau Merkel some support after the terrible defeat that the GERMAN CDU/FDP coalition suffered in February. The EURO rallied against every major currency in the world as markets will caught off guard by Trichet’s strident rhetoric. We will wait to see if April brings the reality of deeds to words.