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In the wake of the US jobs numbers on Friday, which saw the dollar softer as QE3 talk was once again re-ignited, the dollar has continued south, although only modestly so, the dollar index down around a further 0.2% in the aftermath of the release.

In sum, the weaker headline payrolls data should be put in the context of what has been very strong labour market data over the past six months, above and beyond the messages from elsewhere in the economy.

So if last week’s release went some way to narrowing this gap, perhaps that is not such a bad thing after all? Furthermore, the numbers were not overly bad, with the unemployment rate still falling and manufacturing employment growing more strongly than expected. The Fed is still likely to put a lot of conditionality on further quantitative easing, a view Friday’s numbers should not change.

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Commentary

Swiss franc. After Thursday’s nudge of the 1.20 level on EUR/CHF, the Swissie still looks to be in a fairly precarious situation, starting today’s session just above the 1.20 line in the sand that the SNB drew last September, having again tested it in Monday’s liquidity-deprived session.   Since Thursday’s move there has been nothing more substantial from the SNB in terms of rhetoric, beyond the tried and tested line of being prepared to sell CHF in unlimited quantities to defend the level.   Still, the battle is far from over, not least because the SNB has not yet shown its full armoury and, at some point, the market is likely to want to test the SNB’s resolve in a more determined manner.

China back to black.   The gyrations in the Chinese data around the lunar New Year continued overnight, with the trade balance back into positive territory (USD 5.35bln surplus) after the sharp decline in Feb.   However this was more down to weaker import growth, imports much lower than expected at 5.3%.   This comes at the time when concerns are mounting about the pace of the slowdown being seen in the domestic economy. USD/CNY has moved back above the 6.30 level following the nudge below towards the end of last week as the authorities have become more content with stability.

The struggle for stimulus in Japan. The yen has firmed overnight on the back of the BoJ policy meeting, which saw no fresh measures to stimulate the economy or lending.   This was not a major surprise for markets, but nevertheless underlines the struggle the BoJ has convincing markets that it can make a positive contribution to the sustained recovery in the Japanese economy.   The favourable moves on the yen that were evident for most of February and much of March have partially (around one-third) reversed, which is likely to be met with further disappointment and frustration from Japanese exporters. The yen’s safe-haven status once again remains more of a curse than a blessing for the Japanese authorities.