New Normal: Strong NFP, weak USD

According to today's NFP release, 288k jobs were added in April, a lot more than the Bloomberg consensus forecast of 218k. In addition, the March number was revised upwards and the unemployment rate declined to 6.3%. Still, USD strength was only temporary with volatile price action immediately after the release and profit-taking in the hour that followed. For example, USDJPY soared up to 103 but quickly fell back to earlier intraday levels in the 102.30/.50 range:

USDJPY Tick Chart 02 May 2014

Decreasing volatility is still a hot topic for USD pairs. After a few swings on Wednesday, EURUSD 1m implied vol is back below the 5% mark, slowly approaching its 2007 low of 4.65%. Central banks, most notably the Fed, have swamped markets with liquidity leading to artificial USD weakness but also purchases of European equities, which arguably continue to support the EUR.

Speaking of equities, the NFP release was also notable because the S&P 500 mini-future <ESA Index> actually fell after traders realized that this was in fact positive news, which, in today's perverted market can only mean negative news for equities. After all, chances are that the Fed will continue tapering if the economy does relatively well. Bad for equities, right? Following this erratic ESA move, prices recovered (see chart), apparently supported by disappointing NY ISM data and a lower-than-expected 1.1% MoM change in new factory orders. As of this writing, however, the SPX is trading relatively unchanged around 1,880, rendering today's data releases a factual non-event. In the meantime, the VIX is slowly approaching the 10% level. Back to (the new?) normal.

ESA Index 30m 02 May 2014