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Thursday saw the US Non-Farm Payroll report that came out amidst hopes that it would show the US employment situation improving drastically. 

Nevertheless, the data showed a much larger drop than initially estimated: (11,000 more than expected), which raised the number of US unemployed since the recession began to 7.4 million, which is a 10.14% of the population. 

Following the release of the report, the Dollar collapsed, falling the most in one session in about two months. 

The USD had been traded up earlier in the week after the ADP payroll report and the First-Time-Filers unemployment report showed improvement, nevertheless, all the gains were quickly wiped out, as investors were relying on a strong NFP report. 

This report has been especially damaging, since it seems now unlikely that the US Federal Reserve will raise their near low interest rates at their next policy meeting in February.  Forex Investors have been hoping that a spate of positive data would spur the rate hike, yet, with the jobs situation seemingly still in decline, there is little optimism this will be the case.

The ICE Dollar Futures Index (a non-traded indicator that matches the USD performance against a basket of 6 major currencies); fell by its largest margin in two months, hitting just below 77 before recovering to close at 77.02.

At the close, the US Dollar was down 0.12% versus the Euro to 1.44 even, down 1.01% to the British Pound Sterling to 1.602, down .86% against the Canadian Dollar to 1.0301, down 0.72% to the Australian Dollar to 0.9245, down 0.92% to the New Zealand Dollar to 0.7358 and down over 1% to the Swiss Franc to 1.023.

Following the thunder resulting from the recent USD rally, Ben Bernanke, the Federal Reserve Chairman, said that the US economy is still facing a long and steep road to recovery, citing the 10% unemployment rate as the core proof.

These remarks were accompanied by a caution to the financial world that too much should not be read into the recent strong employment report, since it is possible that the rate will stay high on the near future.

This news reinforced the hopes of Forex traders, who thought a rate increase in the US was coming soon.

Bernanke wished to clarify that this is not under consideration based solely on one positive report, and that the low rates seem to be what is driving the recovery that the US appears to go through.

On Tuesday, the Dollar was mixed, floating into positive and then negative territory for several times.

At 10:45PM GMT, the US Dollar was trading up to 0.41% to the Euro to 1.4762, down 1.03% versus the Japanese Yen to 88.56, up 0.66% to the British Pound Sterling to 1.6287, up 0.45% to the Canadian Dollar to 1.0559, down 0.3% versus the Australian Dollar to 0.9088 and up 0.4% to the Swiss Franc to 1.0236.

Trading the EUR: The President of the “European Central Bank”, Jean-Claude Trichet, commented that the Eurozone was facing a “bumpy road” towards its recovery.

Considering that investors have began to feel a loosening on the ECB’s part, particularly regarding the stimulus measures of buying underperforming assets, Trichet declared that, if required, the ECB could easily halt the process of withdrawing emergency support measures for the economy.

These comments put a stop to a quiet rally in which the Euro was broadly up, and the Euro began leveling off.

At 11:00PM GMT, the Euro was trading up to 0.18% against the Pound to 0.9055, down close to 2 against the Japanese Yen to 130.42, flat with the Canadian Dollar to 1.5583, even to the Australian Dollar to 1.6247 and up .01% to the Swiss Franc to 1.5117.

On Monday, the USD rose to levels not seen in more than five weeks against a basket of currencies, extending, this way Friday’s rally, which was sparked by a better jobs report than previously expected. 

The trading patterns seem to indicate that there is much short covering of the Dollar, a theory floating through the market claims, while Forex investors scramble to adjust their holdings after the good sign from the employment data. 

Investors are now expecting the US to begin increasing its almost non-existent interest rates, helping this way to increase the Dollar’s value. 

The ICE Futures Dollar Index was trading at 76.183, a five week high.  The index follows the USD’s performance against six of the major currencies in the Forex marketplace.

At 10:45PM GMT, the US Dollar was trading up 0.87% versus the British Pound to 1.6329, up 0.61% against the Australian Dollar to 0.9089, up 0.92% to the New Zealand Dollar to 0.7095 and up 0.58% against the Swiss Franc to 1.0223.  The Dollar declined on Monday to 0.12% against  the Canadian Dollar to 1.0565 and 0.75% to the Japanese Yen to 89.92.

EUR – On Monday, the Euro surprised investors by not showing any reaction to comments made by European Central Bank President, Jean-Claude Trichet, fact that might indicate that the Eurozone economy is continuously showing signs of recovery. 

German manufacturing orders also surprised investors since the indicator took an unexpected negative turn. However,  the Euro seemed unaffected – trading mixed to higher overall on the day.

At 11:00PM GMT, the Euro was trading down 0.5% against the USD to 1.4786, down 1.09% to  the Japanese Yen to 133.08, up 0.41% to the British Pound Sterling versus 0.905, down 0.66% against  the Canadian Dollar to 1.5615, up 0.14% versus the Australian Dollar to 1.6264 and up 0.12% against the Swiss Franc to 1.5117.