The U.S. dollar is trading higher against all most of the major currencies this morning but not because of stronger economic data. Yesterday afternoon, Egyptian President Mubarak announced that he will not seek re-election and leave office in September. This attempt to ease the unrest fell on deaf ears as protestors call for Mubarak to step down now and not 7 months later, The continued rioting indicates that the problems in Egypt are not behind us, causing some investors to pare back their risk trades. Investors also became nervous after Standard & Poor's downgraded Ireland's sovereign debt rating, sending the euro lower against all of the major currencies.
As for the U.S., even though the ADP employment report beat expectations, investors were not completely enthused by the report which showed 187k jobs added to U.S. payrolls in the month of January. ADP did a horrible job of forecasting the absolute amount of non-farm payrolls in December, but it effectively predicted the direction of NFPs. This means there is a chance that job growth slowed last month but this possibility is slim because of the weak reading in December. The prior month's ADP reading was also revised lower to 247k from 297k. Layoffs on the other hand declined sharply in January according to Challenger Grey & Christmas who reported a 46.1 percent drop in job cuts. Based upon recent jobless claims reports, we know that U.S. companies are laying off fewer workers but the main problem is hiring and not firing. Despite the smaller amount of private sector payroll growth reported by ADP, non-farm payrolls increased a mere 103k in December and would be VERY dollar bearish if payrolls printed less than 100k.
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