• S&P cuts Ireland to BBB+, outlook stable
  • Fed’s Plosser: Strong rebound in economy, inflation may require aggressive policy action
  • Time to tighten may not be a long way off
  • Non-farm payrolls rise 216,000; unemployment rate dips to 8.8% from 8.9% in March
  • Greek finance minister: Deficit will be higher than forecast–Bloomberg
  • Australian Treasurer: Natural disasters, Japan will have big impact on budget
  • Fed’s Fisher: Fed may have done too much in reliquifying economy;Fed’s Fisher: Must stop accommodation; policy normalization makes good sense
  • Fitch places Ireland on review for downgrade
  • ISM 61.2 in March from 61.4 in February; consensus was for 61.0
  • Fed’s Dudley: No reason to reverse course on policy; must not be overly optimistic on growth; not out of woods yet
  • Fed’s Lacker: Rate in hike in 2011 would not be surprising; must be alert to possible rapid withdrawal of monetary stimulus
  • Fitch downgrades Portugal to BBB-; outlook negative
  • S&P 500 closes at 1332, up 0.5%
  • US 10-year note reverses early yield gains on strong US data after dovish Dudley comments
  • Oil closes at 30-month high of $108.14

The dollar rallied broadly ahead of US employment data as the Fed’s Plosser kept the drumbeat for a near-term removal of Fed accommodation from the market going with comments early in the session. The firm US employment report further fueled dollar buying as the market set about adjusting positions for a major shift in monetary policy in the months ahead. Multiple Fed speakers like Lacker and Fisher helped confirm the growing chorus from Fed officials for an imminent change in course.

All that came to a screeching halt with comments from NY Fed president Bill Dudley. Dudley sees no reason to shift policy and pointed out the still tenuous nature of the US recovery. After beginning to adjust positions for higher rate world, traders had to quickly readjust to status quo from the Fed following Dudley, the first among equals, owing to his vice-chairmanship of the FOMC.

EUR/USD fell as low as 1.4061 before sprinting higher. It eventually broke above session highs of 1.4180 around midday and followed through all the way to 1.4246, stalling just pips below yesterday’s 1.4249 high. Central bank sellers were rumored near the highs again, protecting barriers at 1.4250 and 1.4275. Trendline resistance comes in at 1.4279, ahead of 1.4282, the November 5 high.

Sovereign downgrades of Ireland and Portugal were completely ignored, as was news that a large Spanish caja will ask the government for EUR 2.8 bln in capital.

USD/JPY exploded this morning after the US data, building on massive gains and trading as high as 84.73 before stalling. We dipped back to close at 84.04 on profit-taking late in the session. EUR/JPY rose to 119.80, the highest since May of last year. The cross hold up very well amid growing risk appetites.

AUD/USD soared as far as 1.0395 late in the day and we are there as we write very late in the day. Barriers at 1.0400 are targeted.