| Forex Market Outlook 10/07/11 All eyes are on this month's Non-Farm Payrolls report which is expected to show a gain of 60K, with a private sector gain of around 90K. Unemployment is expected to remain at 9.1%. While this is one of the most important data releases, the overall risk themes in the marketplace have held markets back. Economic data has been mildly weak of late, which I think is a positive given the risk environment. One sign that we may see better numbers is the earlier employment report out of Canada, who reported a gain of 61K jobs vs. an expected 15K and the unemployment rate ticked down to 7.1% from 7.3%. **Update** NFP has come in showing a gain of 103K jobs, better than the expected 60K estimate. Private sector jobs added was 137K, better than the 90K expected. Last month's NFP was revised higher to show 57K jobs added vs. the reported 0. Unemployment rate remains steady at 9.1%. The markets have used this opportunity to increase risk appetite, though today's better than expected numbers may reduce the chance of QE3 from Bernanke and the Fed. While overall that would be a good thing, the markets may be slightly disappointed in that prospect. There is an interesting dynamic taking place in the US economy and the "Wall St. Occupation" protests may be the sign that we have hit bottom. We know about the gridlock in Washington DC and the Euro debt crisis, but markets have been looking to move higher for some time. This may be a situation where the markets can no longer wait around for politicians to get their acts together so business may take the bull by the horns and run with it. While this number does not change the economic malaise we are feeling overnight, it a step in the right direction. Should we get some sound economic policies here in the US, then we might actually see some improvement in confidence which in turn would help the economy recover. Not higher taxes, not more government spending, not more free Fed money. Confidence. Meanwhile confidence has increased that Euro zone leaders may be getting it together as they are finally discussing the potential re-capitalization of banks. European bank exposure to sovereign debt is a major problem and the UK bank exposure was likely a reason that the BOE chose to increase QE to add further liquidity if the problems in the Europe got worse. This prompted Moody's to downgrade the UK banks (they're always late to the party, aren't they) and yet the Pound has rallied off of yesterday's knee-jerk reaction the saw the Pound sell-off. As a mentioned yesterday, I thought the market got it wrong initially and indeed I was right. So risk appetite trumped QE in the UK and the markets are moving higher. PPI figures also came in slightly higher than expected showing signs that inflation is still a problem, but the BOE may be willing to deal with issue as the economy recovers. Lost in the mix of what has been taking place in Europe, the Japanese interest rate decision came out last night to little fan-fare as it produced no change in policy. While this is exactly what was expected, there has been some hope that the BOJ might intervene in their currency as recent Yen strength could be extremely detrimental to Japanese exports and thus the economy. Last night's meeting might seem like an obvious place to launch intervention, but my feeling is that the BOJ has been trying to do the unexpected. So if any intervention is coming, it would most likely occur on Sunday night when the Asian markets open. Outside of this, the attention should return to the Euro debt crisis. There is hope that some sort of agreement can be reached within the next few weeks. While there is still risk in the markets, today's report can give us hope that better times may be coming. | 
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