What I am Going to Worry About This Weekend

Perhaps it is because of the snow storm here on the East Coast of the US today; perhaps it is because of the weather may have played in a role in depressing some recent economic data, including consumer confidence, weekly initial jobless claims and some chain store sales, but it strikes me that the market has yet to take aboard the impact this on next week's US jobs report. The Bloomberg consensus is for a 40k loss of jobs. It is not that I have a very scientific way of forecasting this notoriously volatile report, or pretend to have some superior approach or even any special insight. I simply think the risk is on the downside and in a significant way. Over the last three months, non-farm payrolls have declined by 106k. My down and dirty, back of the envelope guesstimate is that the job loss this month is larger than the cumulative total of those three months.

Even if it is weather-induced that the market sharp, market positioning is such that there would be risk of a dollar setback. Admittedly the dollar could sell-off ahead of the data if expectations are revised down. Any economic weakness that stems from the weather will by definition be short lived of course and "paid back". It simply changes the monthly or quarterly contours. At most, the weather may (eventually) prompt some downward revisions to Q1 10 GDP, but then push up Q2 growth expectations.

We continue to highlight what we think is a bullish dollar medium term trend. Such a setback in the dollar that a disappointing jobs report may induce--either in anticipation or in response to the "fact" may be sufficient for short-term momentum players to catch. Medium and longer term investors may be better served embracing such a pullback as a new opportunity to get with the bigger dollar trend.