Commentary: Analyzing the Reaction to Today's Jobs Numbers

Its official, North America is the new center for growth among developed economies.  A surprise to the upside in Non-Farm Payrolls sent the greenback soaring against everything against its North American counterparts.  Just a few short months ago, good jobs numbers would have sent the dollar tumbling as risk was bought on the back of an encouraging new data point.  The USD, as predicted by this analyst, has made a transition from being a safe-haven asset to a 'growth currency'.  In short, as evidenced by today's moves, North America is the anticipated center of growth for advanced economies in the medium term.  It is time to go long USD/JPY, CAD/JPY, MXN/JPY, and possibly USD/CHF.  Selling the Euro also remains a viable short term play, though I still expect a recovery after a further dip in EUR/USD. 

Not even a major central bank could damper the bullish mood.  Despite a rate cut of fifty basis points, the Peso actually managed to appreciate to new session highs after whip-sawing nearly 1000 points in the opposite direction during the minute after the announcement.  To be sure, this awesome volatility can probably be accounted for the market's ability to digest Banixo's one and a half page policy statement which accompanied news of the cut.  While highlighting major downside risks to the World and Mexican economies, namely fiscal consolidation in the US and on going uncertainty in Europe, the central bank sought to calm markets by insisting that the cut was not a 'beginning of an easing cycle.'  Furthermore, the bank reaffirmed its commitment to maintaining its inflation target of three percent.  In general, the bank tried to communicate the cut as a chance to promote robust growth given the slowing of core CPI to 2.88 percent in the last quarter.  

As an investor, I am not sure whether to be even more bullish the MXN, or if this recent development is a cause for concern.  Certainly, the carry for long MXN trades is now less attractive, however, the considerable resilience shown by the Mexican currency despite a reduction of its key policy rate to record low indicates an incredible improvement in overall sentiment.