Upbeat Payrolls, Dovish Fed Create Fireworks in the Forex Market

Friday, 01 April 2011 13:29

The US dollar went through a roller coaster ride after the release of March’s payroll data and a series of Federal Reserve comments during the Friday’ New York session.

Non-Farm payroll change beat expectation with a +216K increase in March vs. +191K expected. The unemployment rate also beat analyst predictions by falling for a fourth consecutive month to 8.8% and achieving its lowest rate in two years. It was expected to remain unchanged at 8.9%.

The positive employment results allowed the US dollar to trigger heavy gains against European currencies and the yen just moments after their released.

However, the sentiment changed when the Federal Reserve made it clear that the jobs growth was not enough to influence their rate hike strategy.

In their comments, Fed members qualified the unemployment rate as “still high” and did not expect it to return to below 6% before three to four years.

Fed member Dudley was particularly dovish of the economical situation. He mentioned that the time wasn’t right for a monetary policy tightening and that he sees no reason to lift the quantitative easing program.

As a result, the dollar reversed and failed to retain its morning gains against most currencies except the yen.

The EUR/USD was particularly volatile. After sinking down to 1.4060, it rebound violently above 1.4200, near this week’s high.