* U.S. jobs report disappoints, dollar weakens
* Euro hit from German objections to ECB bond-buying
* German Constitutional Court also leaves door open to
acceptance of program
* Canadian jobs data better-than-expected, pushes loonie
By Daniel Bases
NEW YORK, Feb 7 The dollar drifted lower after a
weaker-than-expected U.S. jobs report on Friday that muddies the
waters but is seen as unlikely to dissuade the Federal Reserve
from diverting from its path of steadily removing monetary
stimulus from the U.S. economy.
U.S. nonfarm payrolls growth in January came in at a
disappointing 113,000 against a consensus of 185,000, initially
sending the greenback sharply lower. However, a bright spot in
the report showed the proportion of working age Americans who
have a job or are looking for one increased.
After a knee-jerk sell-off of the dollar and an equally
quick rebound, much of the greenback's strength was slowly bled
away like a leaky balloon as the trading day wore on.
One strategist thinks the fact the dollar fell at all was
based on the idea that next week's Congressional testimony by
newly installed Federal Reserve Chair Janet Yellen will be more
dovish when it comes to keeping monetary policy loose because of
extreme weather impacting the data.
David Woo, head of global rates and currency research at
Bank of America Merrill Lynch in New York, thinks this is a
misreading of the data and Yellen and the cause of the dollar's
"I think the market reaction to today's number is based upon
a more pessimistic reading of the economy than I think is
justified and therefore the market expectations that the Fed may
not now taper in March may be less justified than the market
thinks it is," Woo said, leading to the dollar's decline
The euro finished near the top of its range for the day, up
0.331 percent to $1.36350, after having dropped back
from its session high $1.36490 on the EBS trading platform.
Nick Bennenbroek, head of currency strategy at Wells Fargo
Securities in New York, said that as the market digested the
data and looked to the next Fed meeting in mid-March, "the bar
is pretty high for them to deviate from the path."
The jobs report was the second month of weak hiring,
although the jobless rate did decline to 6.6 percent from 6.7
An earlier factor holding back the euro's advance, and
eventually overshadowed by the U.S. data, was news that
Germany's constitutional Court's decision to refer a complaint
against the European Central Bank's bond-buying program to the
European Court of Justice.
The complaint says the ECB's plan, which pumps money into
the financial system much the same way as the U.S. quantitative
easing program, oversteps its mandate and violates a ban on it
The ECB's Outright Monetary Transactions (OMT) program,
announced by President Mario Draghi in September 2012 at the
height of the sovereign debt crisis and as yet unused, is widely
credited with pulling the euro zone back from the brink.
"The ECB has to quickly assess what repercussions the ruling
will have for the range of tools available to calm markets,"
said Christian Schulz, senior economist at Berenberg.
"Ironically, depending on the exact decision, the court may have
made a much more wide-ranging quantitative easing program at the
ECB more likely."
The euro traded up 0.50 percent to 139.45 yen. The
dollar also advanced against the yen, after regaining ground
from the initial sell-off after the jobs data. The greenback
rose 0.19 percent to 102.28 yen.
In contrast to the weak U.S. jobs data was an upbeat report
from Canada which showed a bigger-than-expected increase in its
"I think this increase in employment in January dampens
expectations of the possibility of the Bank of Canada having to
cut rates. But certainly with inflation remaining low, there's
no pressure to start moving rates higher," said Paul Ferley,
assistant chief economist at Royal Bank of Canada.
The U.S. dollar fell 0.27 percent to C$1.1038. It had
been as low as C$1.0964, its weakest point in 2-1/2 weeks.
Sterling extended its gains against the greenback as the
trading session wore on, climbing 0.56 percent to $1.6412
, its best level of the week.