US Payrolls increase meets expectations.

The US employment report recorded an increase in non-farm payrolls of 236,000 for March and close to market expectations while the February increase was revised higher to 326,000 from the original reading of 311,000.

There was another strong increase in the number of government jobs of close to 50,000 but the increase in private payrolls was below expectations at 189,000.

There were job losses in more interest rate sensitive areas such as manufacturing and construction which suggests underlying strength is fading with retail jobs also declining on the month.

According to the household survey, there was a stronger increase of 577,000 in the number of people reported as employed and the unemployment rate edged lower to 3.5% from 3.6% and slightly below expectations of 3.6%.

Average hourly earnings increased 0.3% on the month which was in line with consensus forecasts with the annual increase slowing to 4.2% from 4.6% which suggested that overall wages growth was moderating slightly.

Following the US jobs data, there was a shift in Fed Funds pricing with markets pricing in around a 70% chance that the Fed would increase interest rates by 25 basis points at the May policy meeting.

New Bank of Japan Governor Ueda stated that there was no immediate need to change the joint monetary policy statement with the government. He added that the central bank wanted to avoid a sudden normalisation in monetary policy as it would cause a big impact on markets.

He also stated that all policy options will be debated at every monetary policy meeting. As far as inflation is concerned, he also stated that the bank will do its upmost to achieve the inflation target while paying attention to side effects. The rhetoric overall maintained expectations that the centra; bank would maintain a very loose policy in the short term.

The increase in US yields, solid US jobs data and dovish Bank of Japan rhetoric helped support the dollar and undermined the yen with USD/JPY hitting 3-week highs around 133.85 before a correction.

The Australian dollar dipped lower during the holiday period with significant geo-political concerns as China carried out extensive and provocative military exercises around Taiwan. Stronger than expected domestic data provided an element of relief on Tuesday.

It was also announced that Australia would suspend its WTO dispute against China over Barley.

The Euro was unable to make any headway during the holiday period. The dollar was boosted by the slightly stronger than expected jobs data and a shift in Fed expectations. EUR/USD dipped to lows below 1.0850 on Monday. The dollar faded from peak levels and EUR/USD recovered to the 1.0895 area.

The dovish comments from Bank of Japan Governor Ueda undermined the yen. USD/JPY posted 3-week highs around 133.85 before a retreat to 133.35 on Tuesday.

The Swiss franc hampered by an increase in global interest rate expectations. EUR/CHF settled around 0.9880 with USD/CHF around 0.9100.

There were no UK developments given the market closures. GBP/USD retreated to lows below 1.2350.

The Australian dollar was hampered by concerns over Taiwan developments. With US dollar gains, AUD/USD dipped to 0.6620 on Monday. There was a strong rebound in Australian consumer confidence to 10-month highs which provided some relief. AUD/USD recovered to 0.6670 on Tuesday. USD/CAD posted gains to 1.3550 before a correction to 1.3500.