Previous Day's Market Highlights
Friday saw October's US labour market data surprise to the upside, as headline nonfarm payrolls increased by 128,000 last month - better than almost all estimates prior to the release. The jobs gain is even more solid when the loss of around 41,000 workers from the GM strike are accounted for - putting underlying jobs growth closer to 180,000. Furthermore, a net 95,000 upward revision to the previous two month's releases provides further evidence that the labour market may be more resilient than first thought. While jobs growth is still clearly slowing compared to last year, payrolls remain relatively solid, with the 3-month average now standing at 176,000, having hovered around a similar level for the last 3 months.
Other aspects of Friday's employment report were also strong, with average earnings increasing at 3.0% YoY, as expected, and the unemployment rate modestly ticking up to 3.6%, just above a 5-decade low.
Overall, the report could be described as putting the US labour market in a 'goldilocks' situation; a market that is not too hot, or too cold, but is just right. As such, Friday's report is likely to do little to alter the Fed's recent policy shift, with officials set to pause and assess the impact that recent insurance cuts are having on the US economy before looking at making any further policy alterations. Of course, the jobs report was met with delight from the Tweeter-In-Chief, with President Trump commenting that the payrolls number was a "blowout" and that the "USA ROCKS!"
For markets, the jobs report, and prospects of continued loose monetary policy in the US, supported risk appetite, which saw the Aussie and Kiwi dollars remain well-bid. However, the greenback failed to benefit from the better than expected report, with disappointing ISM manufacturing PMI data exerting pressure. The survey printed 48.3, signifying a 3rd straight contraction in the sector; resulting in the dollar settling 0.25% lower.
Elsewhere, Friday saw little in the way of significant Westminster political developments, leaving sterling once again struggling for direction. The pound ended Friday 0.1% lower against both the dollar and euro, having meandered for most of the day. Other majors were also subdued; the euro settled unchanged, while the Canadian dollar added 0.3%, gaining in line with a rally in oil prices.
Over the weekend, opinion polling for the upcoming Christmas general election continued to show the Conservatives holding a solid lead, on average polling 12 points ahead of Labour (at 39% and 27% respectively). Also over the weekend, PM Johnson ruled out an electoral pact with Nigel Farage's Brexit Party, likely to result in the latter standing candidates in almost all seats in Great Britain - potentially splitting the 'leave' vote - though Farage himself will not be making an 8th attempt to become an MP.
Away from FX, equity markets ended Friday on the front foot, buoyed by the upbeat US labour market data. In Europe, the pan-continental Stoxx 600 closed 0.7% higher, while the US benchmark S&P 500 gained just under 1%, closing at a fresh record high. Finally, oil prices firmed after better than expected manufacturing data from China eased some demand concerns. Global benchmark Brent settled 3.6% higher, while US WTI crude added 3.75%. However, the gains weren't enough to prevent both blends from sliding to weekly losses.
|Currency Pairing||08:00 Today||Vs 08:00 Yesterday||Four-Week High||Four-Week Low||% Change|
Today's Market Highlights
A fresh trading week begins with a busy economic calendar, as a selection of useful leading indicators due from the eurozone, UK and US come into view. From the eurozone, and likely the day's most impactful release, October's final manufacturing PMI figures are due, set to show the industry contracting for a 9th straight month, with a reading of 45.7 expected. While such a figure would be unchanged from the 'flash' estimate, the data would continue to evidence the fragile momentum across the euro area. In addition, close attention will be paid data points from individual nations, particularly Germany, as investors continue to look for signs of further softness.
Meanwhile, from the UK, construction PMI figures are expected to remain below the crucial 50 boundary between expansion and contraction for a 6th consecutive month, though market reaction to the release is typically non-existent. Across the pond, September's factory orders are set to have decreased by 0.3% MoM, likely to result in further concern over the health of the US manufacturing sector.
Turning to monetary policy, recently-appointed ECB President Christine Lagarde will make her first remarks this evening, though Lagarde's stance is likely to be similar to Draghi's era of ultra-loose policies. Also in focus will be the Reserve Bank of Australia's (RBA) latest policy decision, which is likely to see policymakers leave interest rates on hold at a record-low 0.75%, while maintaining their easing bias.
Later in the week, attention shifts to Threadneedle Street, for the Bank of England's (BoE) latest 'Super Thursday'. The BoE are unlikely to alter policy, however MPC members will likely strike a more cautious tone, while perhaps also downwardly revising their economic forecasts. BoE Governor Carney will also chair what may be his final press conference, shortly after the policy decision.
Turning to politics, developments in Westminster and the general election campaign will continue to be the dominant force driving the pound. While already underway, campaigning will formally being on Wednesday, after the dissolution of Parliament. Before then, however, the Commons will, on Monday afternoon, elect a new Speaker to replace John Bercow. Bercow's deputy, Sir Lindsay Hoyle, is the current favourite, with whoever is elected likely to have significant bearing on the direction of the Brexit process in the coming months.
Away from politics, this week's economic calendar is well populated. From the US, with every data point feeding into the FOMC's thinking on future interest changes, attention will centre on Tuesday's ISM non-manufacturing PMI and Friday's preliminary consumer sentiment gauge from the University of Michigan. Elsewhere, labour market reports are due from Canada and New Zealand, while attention will also fall on Friday's Chinese trade data as investors continue to gauge the impact of ongoing Sino-US tensions. Finally, growth expectations will also be in focus, with the OBR set to release updated economic forecasts for the UK, and the European Commission set to publish their latest growth forecasts for the bloc.
Today's Economic Calendar
|9.00am||EUR||Final Manufacturing PMI (Oct)||45.7||45.7|
|9.30am||GBP||Construction PMI (Oct)||44.0||43.3|
|14.30pm||GBP||House of Commons Elects New Speaker|
|15.00pm||USD||Factory Orders (MoM - Sep)||-0.3%||-0.1%|
|19.30pm||EUR||ECB President Lagarde Speech|
|3.30am (Tues)||AUD||RBA Interest Rate Decision||0.75%||0.75%|