How's the water?

While the headline payroll report was as close to consensus as you'll ever see, sure enough there were some revisions that suggested a stronger US labour market that previously thought. Quelle surprise! Perversely, construction payrolls showed another modest 12k gain. Macro Man was actually pleased to see that, as it implies that either

a) the payroll data is as useless as he thinks it is
b) Homebuilders still don't get it, meaning more pain to come
c) Both of the above

Either b or c would suit the portfolio, naturally.
Markets clearly are trading on the basis of pain or flow, however. While this week's US data has, in aggregate, been somewhat better than expected, it surely didn't merit tacking on 20 bps to the ten year yield. It seems likely that the market has been caught long and wrong and is now paying the price.

In FX, meanwhile, the market (or, more specifically, central banks) have decided that they are buyers of EUR/USD at current levels no matter what. So after payrolls produced a run of stop losses down to 1.3568, Macro Man's best buddies the central banks have helped drive it up to a high of 1.3642. The moral of the story is that when swimming in financial market waters, you should know who and where the sharks may be.
Nowhere is this more true than in Russia, where the recent revaluation of the rouble has been compltely unwound. Is this a temproary quirk, or did the CBR just pull the bid to let Russian corporates buy some cheap dollars? We'll only know if the fullness of time, but it is interesting to note that Rosneft paid US-based UniTex today for its share in Yukos gas stations. Hmmmmm.....

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