NEW YORK ( BBH FX Strategy) -- The dollar is firmer against major and emerging market currencies. The euro failed to hold above the 100-day moving average around 1.3261 as the initial excitement from the PSI success faded, unable to break the 1.3291-retracement level from the February-to-March drop.USD/JPY touched a nine-month high at 81.90, driven in part by Japanese importers selling yen. Periphery 10-year sovereign debt is little changed with the exception of Portuguese yields, which are down 15 basis points. The Euro Stoxx index is down 0.2% and S&P futures are flat.
Jobs data today will make things tricky, coming right near the ISDA decision and Eurogroup call. Consensus for February non-farm payrolls is a positive 215,000 vs. 170,000 in January. That would be consistent with continued improvement in the U.S. labor market. The correlation between EUR and the S&P has been rising again, suggesting that a positive surprise in NFP could lead to some short-term EUR strengthening. The 30-day percentage change correlation between the two rose to 0.61, up from a recent low of 0.57 in late February, but still much lower than the high of 0.855 in December. More broadly, however, eurozone stresses remain in play, meaning that the upside for the euro is likely to be limite. Note that the spread between two-year U.S. and German yields has continued to widen steadily in favor of the U.S. At 15 basis points, the spread between the two is now back to levels not seen since June 2010 as U.S. yields steadily move higher and Germany lower. While the 30-day correlation has shifted over time, we are for now back in the area whereby wider spreads in favor of the U.S. go hand in hand with dollar strength.