Previous Day's Market Highlights
The dollar failed to rally significantly on Friday despite a strong headline payrolls figure showing that 304,000 jobs had been added to the economy in January – well above the 165,000 expected by market participants and the 100th consecutive month of job gains. The greenback was held back however by a slight increase in the unemployment rate to 4% as well as a dip in wage growth to just 0.1% on a month-on-month basis, well below expectations. Also taking some of the shine off of the release were revisions to November’s and December’s payrolls figure with the latter revised downwards by 90,000. After the report, the dollar gained modestly with the greenback adding around 0.2% over the course of the afternoon against a basket of peers though the US labour market remains in good shape, with job gains averaging 241,000 over the last 3 months.
Despite nonfarm payrolls being the main focus of attention, the monthly CPI inflation release showed mildly positive signs for the euro with a slight uptick in core inflation to 1.1% on a year-over-year basis. Despite the headline figure dipping to 1.4% year-over-year, the increase in core inflation will be seen as a positive for the ECB with inflationary pressures beginning to build in the eurozone ahead of a planned rate hike later this year. Meanwhile, manufacturing PMI figures for the eurozone and UK were released broadly in line with expectations, with both just in expansionary territory. In contrast, ISM manufacturing PMI figures for the US rebounded strongly after last month’s sharp, 5 index point fall to register a positive reading of 56.6.
Over the course of the week the pound was the weakest major currency, losing just under 1% against the dollar, with sterling weighed down as concerns over a no-deal Brexit continue to linger. On the other hand, commodity currencies outperformed with the Australian, New Zealand and Canadian dollar all gaining over three-quarters of a percent – with the rally helped by increasing crude prices and an improvement in global risk sentiment.
Away from FX, both European and US equity markets closed out the week with modest gains. Both the STOXX 600 in Europe and the Dow in the US added around 0.25% on Friday, with the latter index closing out its sixth straight week of gains. Finally, crude prices gained a further 1.5% on Friday, with WTI trading at its highest level since November as fears over sanctions imposed on Venezuela continued to worry market participants.
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Today's Market Highlights
Today’s economic calendar is relatively quiet, giving market participants relatively little food for thought. The main highlight for the UK is set to be the release of monthly PMI figures for the Construction industry which are expected to remain in positive territory for the 10th consecutive month though the impact of pre-Brexit orders and stockpiling will be closely watched. Elsewhere, data is of lower tiers and unlikely to cause major volatility including eurozone producer price inflation and US factory orders, with the latter expected to rebound sharply from its 2.1% fall in October.
Looking ahead to the rest of the week’s economic data, services PMI figures from the eurozone, UK and US will all be closely watched amid a context of growing concerns over a synchronised global economic slowdown. While all are expected to remain in expansionary territory, the UK figure will be examined for any business concerns relating to the ongoing Brexit uncertainty. Furthermore, labour market reports from Canada and New Zealand are also set to be in focus, with the latter likely to command significant attention after the last release beat market expectations by a significant margin.
Finally, central bank meetings are also in the limelight with both the Reserve Bank of Australia (RBA) and Bank of England (BoE) holding their first policy meetings of the year. The RBA are set to keep interest rates on hold on Tuesday, though may cast a pessimistic outlook over the domestic economy amid a climate of falling house prices, slumping business and consumer confidence and a drying-up of credit. The accompanying rate statement on Friday will also be closely watched, with investors currently pricing a 50% chance of a rate cut by 2020. Later in the week, the BoE meeting is a ‘Super Thursday’ event, meaning not only will a rate decision be announced but also the Bank’s latest inflation report as well as a press conference from Governor Carney. With unanimous expectations for policy to remain unchanged, the market’s focus is likely to tilt toward any comments around the ongoing Brexit-related uncertainty as well as attempting to gauge the likely direction of policy once Brexit has been resolved.
Today's Economic Calendar
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