Flat jobs numbers, and more euro woes

North American economic data will take center stage this week as March employment numbers will be announced on both sides of the border. Analysts are calling for 190,000 new jobs in the U.S. with the unemployment rate remaining unchanged at 7.7%.

In Canada, only 6,500 jobs are forecast for the March report, but this follows a very strong February where over 50,000 jobs were created. Our unemployment rate is also expected to remain unchanged at 7.0%.

Read: Sequestration: Wrong cuts, wrong time

Thursday is “Super Thursday” among central bankers, as the Bank of Japan, the Bank of England and the European Central Bank will all hold their monetary policy meetings and make interest rate announcements.

These meetings will certainly have the attention of currency traders as great expectations are hanging over the Bank of Japan for further easing and comments from European Central head Bank Mario Draghi will definitely be interesting considering the recent Cyprus turmoil.

Read: The right mix for global exposure

We could see continued strength for the U.S. dollar, which may keep gains on commodity prices limited, especially if the U.S. employment report is better than expected. We don’t expect the Canadian dollar to make material gains on its U.S. counterpart.

QUESTION OF THE WEEK

Considering where equity markets are currently trading, is it safe to say concerns about Cyprus were overblown?

The simple answer is no. There was certainly a great deal of risk surrounding the bailout of Cyprus and that risk still exists. However, markets did not sell off dramatically, as some expected, because the exposure of European financial institutions to Cyprus was not as high as with Greece or Portugal. Therefore, hits to capital levels have thus far been limited, sovereign financing is still available and liquidity within the European financial system has not dried up.

Read: Cyprus not a full Eurozone member: Analyst

The real damage hasn’t been done to liquidity, but to confidence in the European banking system and the expected safety of what are believed to be insured deposits.

We shouldn’t expect the approach to Cyprus to be applied to Greece, Ireland, Portugal and Spain, as they are already well into their bailout processes. But rumours are swirling about worries in countries like Slovenia and Malta, where going after depositors could be an option if either runs into trouble.

If the Eurozone is trying to create the image of a strong banking system, you wouldn’t know it from the way they handled the Cyprus bailout. The debacle has done nothing but create mistrust of European officials and of the banking system in general.

Gareth Watson is the Vice President, Investment Management & Research at Richardson GMP in Toronto. This team of research experts is responsible for monitoring and interpreting economic, geo-political situations, current market environments and trends. @Gareth_RGMP