Blockbuster Payrolls Boosts the Dollar

The latest market highlights and our views on the key developments as a blockbuster payrolls number sees the dollar catch a bid, the loonie stumbles on jobs disappointment, sterling remains well-supported ahead of the election, and a host of central bank decisions are due this week.

Previous Day's Market Highlights

Friday saw markets react to a blockbuster US payrolls report, a cataclysmic jobs report from Canada, and the election campaign enter its final week.

"Jobs, Jobs, Jobs"

The last jobs day of the decade didn't disappoint on Friday, with November's US labour market delivering a blowout payrolls number.

The US economy added 266,000 jobs last month - the biggest advance in payrolls since the beginning of the year; along with a combined upward revision of 41,000 to September's and October's jobs gains. Together, this puts the 3-month average of jobs gains at 205,000; while the year-to-date payrolls average is a solid 180k, just 40,000 below last year.

Meanwhile, the other aspects of the jobs report were similarly upbeat on the US labour market. Unemployment unexpectedly fell to 3.5%, equalling the 50-year low last seen in September, while underemployment (which includes workers who are no longer seeking jobs, and part-time workers seeking full-time work) fell to 6.9%, also the lowest since September.

Average earnings are also increasing at a healthy clip, with hourly earnings ticking up by 3.1% YoY, and 0.2% MoM. October's earnings data was also upwardly revised, pointing to an increase of 3.2% YoY in the month before last.

Overall, the jobs report blew expectations out of the water, pointing to a tight, buoyant labour market with strong jobs gains, low unemployment, and solid wage growth. As a result, the dollar gained ground on Friday, adding around 0.3% against a basket of peers, chalking up its first daily gain in a week.

The upbeat jobs report also pleased the tweeter-in-chief, with President Trump heralding a "great jobs report" and stating that the "country is doing better than ever before. Jobs, Jobs, Jobs".

Cataclysmic Canadian Jobs Report

If the US labour market data was blockbuster, jobs numbers from north of the border were anything but.

Friday also saw the release of monthly labour market data from Canada, which showed the economy losing a net 71,200 jobs last month - the largest 1-month job losses since 2009 when the global economy was in the throes of the financial crisis.

Unemployment also jumped, to 5.9%, well above expectations and the highest level in over a year.

In fact, the only positive of the abysmal jobs report - which comes just days after the BoC's hawkish hold - were average earnings, which remain elevated at 4.4% YoY. Nonetheless, the report shows Canada's labour market to be in a precarious state, resulting in the loonie dipping 0.5% on Friday and markets once again beginning to price in policy easing from the BoC.

Election Update

Away from the data, campaigning for Thursday's general election continues, with last Friday seeing the final set-piece TV event of the campaign - though sterling remained rangebound as the week drew to a close.

The two candidates for Prime Minister, Boris Johnson and Jeremy Corbyn, went head-to-head on Friday evening, though neither seemed land any significant blows, with both leaders seemingly following a 'safety first' strategy, sticking to their well-rehearsed attack lines.

Boris Johnson repeated that the electorate's choice is between a Tory majority and a hung Parliament, while sticking to the 'get Brexit done' message. Corbyn, meanwhile, disputed Johnson's claims that a UK-EU trade deal can be negotiated quickly, while also pledging increased investment in public services. A snap YouGov poll after the debate showed it to be largely a dead heat, with 52% of respondents putting Johnson as the winner, and 48% selecting Corbyn. Don't those percentages sound familiar?

Over the weekend, the final round of Sunday opinion polling shows the Tories maintaining their lead; on average, standing 9 points ahead of Labour with 4 days of the campaign to go. With such little time remaining before polling day, has time run out for Labour to make up ground?
 
Any Other Business

  • Putting the cherry on top of the dollar's cake on Friday were solid consumer sentiment figures from the University of Michigan. The preliminary reading for December put the index at 99.2, the highest since May.
  • Bank of Canada Governor Poloz announced on Friday that he would be stepping down at the end of his term in June 2020. A search for a successor is now underway
  • Equity markets closed higher on Friday, supported by the US jobs report. The pan-European Stoxx 600 closed 1.1% higher, while the US S&P 500 added 0.9%
  • Oil prices firmed on Friday after the announcement of additional, deeper production cuts from OPEC. Global benchmark Brent settled 1.6% higher, while US WTI crude gained 1.3%

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1905 1.1914 1.1620 2.47%
GBP/USD 1.3175 1.3180 1.2820 2.73%
EUR/USD 1.1060 1.1116 1.0981 1.21%
GBP/AUD 1.9275 1.9285 1.8863 2.19%
GBP/NZD 2.0080 2.0297 1.9837 2.27%
GBP/CAD 1.7460 1.7471 1.7023 2.56%

Today's Market Highlights

Today's Market Highlights

Despite the quiet data calendar today, the week ahead is set to be anything but, with the general election; rate decisions from the Fed, ECB and SNB due; a potential impeachment vote in the House; and the potential imposition of additional tariffs on Chinese goods all events set to feature in the week ahead.

The Day Ahead

Today's data calendar is devoid of any major releases, with the only notable releases being this morning's eurozone investor confidence figures, as well as this afternoon's Canadian building permits and housing starts numbers.

As a result, with none of the aforementioned prints likely to result in major volatility, market participants will remain primarily focused on Sino-US trade headlines as the primary driver of risk appetite ahead of Sunday's deadline for the imposition of additional tariffs.

Election - The Final Countdown

The final stretch of the election campaign is now upon us, with this week set to see the parties making their final pitches to the electorate ahead of polling day on Thursday.

For markets, opinion polling will remain the centre of attention, particularly Tuesday's release of the final YouGov MRP model of the campaign. The poll - which uses a much larger sample size than traditional polls, as well as multi-level regression and post-stratification to predict the result on a seat-by-seat basis - is regarded by markets as a more accurate representation of the likely result, particularly after correctly predicting the 2017 election.

As with all polls, should the model continue to predict a Tory majority, sterling should remain well-supported going into polling day.

Of course, come polling day, markets will primarily react to the exit poll, before watching the results trickle in throughout the night. The picture of who will form the next government should become clear by around 3 or 4 o'clock on Friday morning. A detailed look at the election and potential market impact can be found here.

Week Ahead - Central Banks

Away from the election, the week ahead sees this year's final monetary policy decisions from the Federal Reserve (Fed), European Central Bank (ECB) and Swiss National Bank (SNB).

None of the Banks are expected to alter any policy settings this week, however it will be interesting to see how ECB President Lagarde handles her first meeting at the helm of the Bank. Meanwhile, the Fed will continue to leave policy on hold, while the SNB remain primarily concerned with the value of the CHF.

Week Ahead - Data

Finally, this week's data calendar is relatively light, with only a couple of US releases of note. Investors will pay close attention to Wednesday's CPI inflation print, along with Friday's retail sales numbers, though neither are likely to significantly alter the FOMC's policy stance.

Today's Economic Calendar

Time Currency Release Consensus Previous
9.30am EUR Sentix Investor Confidence (Dec) -4.9 -4.5
1.15pm CAD Housing Starts (YoY - Nov) 221k 202k
1.15pm CAD Building Permits (MoM - Oct) -2.0% -6.5%