Jobs Day

All eyes on today's US jobs report after yesterday's disappointing manufacturing data causes the greenback to slide.

Previous Day's Market Highlights

The dollar was the major mover on Thursday, losing more than 0.75% against both the pound and euro after ISM manufacturing PMI figures missed expectations by a vast margin. Despite still showing expansion in the industry, December’s PMI was 5 index points lower than the previous release with the accompanying report also making mention of growth in the industry having stopped and businesses concern increasing over trade tensions. The report has done nothing to calm worries over a global economic slowdown, with even greater focus now being placed on the jobs report to gauge US economic health.
 
Other data of note included UK construction PMI figures, released in line with expectations and ADP nonfarm payrolls, which beat estimates by over 100k. While the correlation this figure and tomorrow’s NFP figure is questionable, it has undoubtedly heightened expectations for a positive report tomorrow afternoon.
 
After last night’s flash crash, yen pairings remained firm with the safe-haven currency also coming under demand after equity markets recorded losses in Europe and the US. European bourses lost more than 1%, while US markets closed down by more than 2%. Volatile trading was also seen in the fixed income markets, with US 10-year yields falling to a 1-year low at 2.59%.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1090 1.1170 1.1004 1.49%
GBP/USD 1.2651 1.2800 1.2440 2.81%
EUR/USD 1.1407 1.1496 1.1269 1.88%
GBP/AUD 1.8010 1.8190 1.7291 4.94%
GBP/NZD 1.8905 1.9025 1.8117 4.77%
GBP/CAD 1.7011 1.7392 1.6700 3.98%

Today's Market Highlights

It is shaping up to be a volatile end to the week, with the focus of market participants attention today lying with the monthly US labour market report, which has taken on even greater significance after recent poor US economic data and a further increase in fears over an economic slowdown. Investors will be looking for a headline nonfarm payrolls number around the 180k mark, with the 3-month average being 195k. A positive ADP report yesterday has heightened expectations for an above forecast release, hence a sub-180k headline could spark a significant dollar sell-off. Also released will be the unemployment rate and wage growth, set to remain steady at 3.7% and 3.0% respectively, with both being watched closely for evidence of slack in the labour market.
 
Despite the payrolls report stealing the limelight, European traders will have plenty to focus on with both UK services PMI and eurozone inflation estimates for December on the schedule. With the services industry making up approximately 80% of the UK economy, the PMI figure will be closely examined for both Brexit-related impact on the industry as well as the general health of the UK economy. In the eurozone, with inflation remaining below target and the ECB having revised their forecasts lower, market participants will be looking for a resilient reading ahead of the ECB beginning to gently tighten monetary policy.

Elsewhere on the data front, employment figures from Canada will also be released, and may attract some market attention especially after considerably more jobs than forecast were added in December. Also of note, is an interview with Fed chair Powell and retired Fed chairs Yellen and Bernanke. While this could be a non-event, it also has the potential to spark significant volatility if Powell deviates from the Fed’s recent comments or makes any comments relating to recent market turbulence.

Next week’s economic calendar is also busy, with GDP figures from the UK, inflation data from the US and a meeting of the Bank of Canada. The latter could be a source of volatility, with the market currently 50/50 over whether a 25bps rate hike will be announced.

Today's Economic Calendar

Time Currency Release Consensus Previous
9:30am GBP Services PMI 50.7 50.4
10:00am EUR CPI Flash Estimate (y/y) 1.8% 1.9%
10:00am EUR Core CPI Flash Estimate (y/y) 1.0% 1.0%
1:30pm USD Nonfarm Payrolls 177K 155K
1:30pm USD Average Hourly Earnings (y/y) 3.0% 3.1%
1:30pm USD Unemployment Rate 3.7% 3.7%
1:30pm CAD Employment Change 5.0K 94.1K
1:30pm CAD Unemployment Rate 5.7% 5.6%