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Markets were bullish the Big Dollar overnight in advance of this morning’s Non-Farm Payrolls Report (NFP) and Unemployment Rate. Despite the US Federal Reserve holding steady on both rate and tapering earlier this week the Greenback took ground against almost all of its 16 major counterparts as a string of strong economic data releases and optimism for today’s NFP dominate. This has set the Dollar Index (a trade weighted measure of the USD) up for its first weekly gain in a month.

The Australian Dollar plunged to near 3-year lows versus the Greenback in overnight trade on the back of bets that Australian policymakers will cut rates at their next meeting. The AUDUSD slid for the 5th consecutive day as it tested the water near 0.8900. The pair continues to look weak following comments from Reserve Bank of Australia head Stevens earlier this week in which he warned of lower rates and further declines for the Australian Unit.

Elsewhere is Asian currencies, the USDJPY moved up towards 100.00 overnight on general Greenback optimism. This had a positive impact on Japanese equities as exporters, carmakers & electronics manufactures in particular, soared. By the time the dust had settled in Tokyo the Nikkei and Topix expanded 3.29% and 2.82% respectively. Broadly speaking Asian equities had a strong session as investors breathed a sigh of relief that central bankers would remain accommodative with stimulus and interest rates for the time being.

The only important new piece of economic data released overnight was the UK Construction PMI, which shattered expectations of 51.5, printing 57.0. This is a massive jump from June’s 51.0 and represents the highest reading since 2010. The Construction number along with the strong Manufacturing PMI released this week is an encouraging sign for the UK economy, which has struggled to maintain positive economic growth. The British Pound reacted favorably to the data, managing to stem losses versus the USD and make solid gains against the EUR, JPY, and the Scandies. Going into next week’s UK Inflation Report there is a good case to be optimistic about the Sterling, though the currency remains at risk versus the Greenback and tapering sentiment.

The long awaited NFP result was released early this morning at 162k, well short of the consensus forecast of 184k according to Reuters. Also released this morning was the unemployment rate, which came in at 7.4% versus expectations of 7.5%. Following this week’s strong ADP report, weekly Unemployment Claims, and GDP number, markets were caught off guard by the soft NFP print. Investors have chosen to focus on the NFP result and not the Unemployment Rate, the Greenback selling off hard in the immediate aftermath of the data. This reflects sentiment that the Federal Reserve may approach tapering more cautiously in the coming months.

Looking to the USDCAD, the pair has backed off of overnight highs and is trading similar to where it did yesterday, which is still on the high side of this week’s range. Despite this setback for USD bulls, the existing framework guiding USDCAD action remains in place. Namely there has been not significant violation of the ascending channel that has defined the pair in recent months. This morning’s number doesn’t help to notion of a US recovery, but it doesn’t mortally wound it either. Strong data released previously cannot be ignored.

Further reading:  Fed Chairman Larry Summers? Turbulent Times Ahead