Weak NFP = USD down - a new situation? | Forex Factory

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Weak NFP = USD down - a new situation?

  • #1
  • First Post: Jan 9, 2010 2:23pm Jan 9, 2010 2:23pm
Hi, would you agree that the USD carry trade is dead or dying? The latest NFP came out below expectations and the USD suffered against the EUR (I haven't checked against other currencies).... For a long time bad news would have meant unwinding of USD carrytrade positions, so are we now in a situatin where the carrytrades have been unwound, and.. "back to normal", so to speak...?
  • #2
  • Jan 9, 2010 2:27pm Jan 9, 2010 2:27pm
Do you know the definition of carry trade?
  • #3
  • Jan 9, 2010 10:01pm Jan 9, 2010 10:01pm
Quoting claudiorosso
Hi, would you agree that the USD carry trade is dead or dying? The latest NFP came out below expectations and the USD suffered against the EUR (I haven't checked against other currencies).... For a long time bad news would have meant unwinding of USD carrytrade positions, so are we now in a situatin where the carrytrades have been unwound, and.. "back to normal", so to speak...?
i just answer to the title, Weak NFP = USD down - a new situation? no, its not a new situation. have a look the nfp release on DEC 2009, it have exactly same affect as this month. last month strong nfp cause USD go stronger, it was because increase ppl's expectation of US RBA increasing the intreste rate, and this month exactly opposite, weak NFP decrease ppl's expectation of US RBA increasing the intreste rate, so USD go down. im expecting usd will continuse go down next week. USD bearish.
  • #4
  • Jan 9, 2010 10:54pm Jan 9, 2010 10:54pm
Quoting claudiorosso
Hi, would you agree that the USD carry trade is dead or dying? The latest NFP came out below expectations and the USD suffered against the EUR (I haven't checked against other currencies).... For a long time bad news would have meant unwinding of USD carrytrade positions, so are we now in a situatin where the carrytrades have been unwound, and.. "back to normal", so to speak...?
if the results came out worse as they did, that strengthens the carry trade as there is less chance of US rate rise. This enforces the carry trade.

lately there has been a lot of speculation for a us rate rise, hence stronger us figures usd up. that is a major change as the usd was a risk asset so in the past strong us figures usd down. figures in us came out worse usd up.

I would not say ATM the carry trade is unwinding. AUD/USD carry is still going on.
  • #5
  • Jan 10, 2010 5:24am Jan 10, 2010 5:24am
Quoting >Apocalypto<
if the results came out worse as they did, that strengthens the carry trade as there is less chance of US rate rise. This enforces the carry trade.

lately there has been a lot of speculation for a us rate rise, hence stronger us figures usd up. that is a major change as the usd was a risk asset so in the past strong us figures usd down. figures in us came out worse usd up.

I would not say ATM the carry trade is unwinding. AUD/USD carry is still going on.
Thanks Apocalypto, well, here´s the situatin as I sort of see it:

The FED brought rates all the way down to zero as an answer to the crises, stating that they would stay there for a long time. Now the recovery makes the market think that ratehikes might be forthcoming - (and a couple of comments on that: 1) The 30 days fed funds futures contracts are at the same rate for april, may, june expiries, whereas the july one is trading lower, thus implying that the meeting on the 23rd of June might be the occasion for the first hike. 2) I think we need to understand also that they need to unwind all the QE programs they've been setting up: TARP, Asset purchase programs. etc. etc. - there´s like 15 of them. Also the 8000 USD taxcredit has been extended... Some actually think that it's much more likely that it will take them so long to unwind the QE programs, that they´re not gonna hike this year, and the higher rate implied by the July contract is simply a risk premium.)

What happened after the 4th of Dec Non Farm was that USD market rates started ticking up, making the USD less interesting as a funding currency, and the market turned to the good, old JPY, that has a very stable Central Bank outlook - the market implied very low JPY rates much farther into the future than USD/GBP, for example.

So my initial question wasn't "is the carrytrade dead" - it was: "is the USD carrytrade dead"... My answer would be yes, in the light of these two events:
1) 4 dec NFP: much better than expected, USD higher on expectations of tightened monetary policy
2) confirmation from latest NFP: worse than expected: USD Lower.

Basically, it seems that the market is discarting the USD as a funding currency, but in the light of the above comments reg. QE measures actual FED ratehikes might happen well into the future, not sure - your comments?
  • #6
  • Jan 10, 2010 5:28am Jan 10, 2010 5:28am
Quoting magnumfreak
Do you know the definition of carry trade?
Thanks, Magmumfreak - I am not aware of any official "definition of carry trade", as you put it - is there one? Maybe you could enlighten me? I would appreciate it.
  • #7
  • Last Post: Jan 10, 2010 5:34am Jan 10, 2010 5:34am
Yes i think we are back to normal. if next month NFP news is good, dollar will get strengthen.

I am checking previous NFP releases and pips changes for that hour. It seems except one month- june 2009, all the other months have straight impact i.e

If NFP news is good = bullish dollar

If NFP news is bad = bearish dollar.
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