Both USD and CAD have been crushed in the wake of surprisingly poor employment numbers for December. The US had a mixed report with nonfarm payrolls coming in way short of expectations, but November being revised up sharply (which raised the bar to beat) and its unemployment rate dropping. Canada’s report was dismal all around with a big drop in jobs confirmed by an even bigger drop in full-time jobs and the unemployment rate rising. The main beneficiaries of this selloff have been gold and silver which have rebounded from recently depressed levels. In currency markets, continental currencies have made the most hay from the situation with SEK, CHF and EUR leading advances. Energy commodities and copper have also taken advantage of USD weakness to rebound helped along by better than expected Chinese imports announced last night. Stock indices have been quite volatile in the wake of the news falling initially then clawing back most of their initial losses, then starting to drop again. This action suggests indecisiveness among traders about what the numbers mean about the economy and the outlooks for corporate earnings and the Fed’s tapering program. Last night Minneapolis Fed Governor Kocherlakota, one of the most dovish members of the FOMC suggested that if the economy continues to meet expectations, the Fed would likely taper QE at every meeting this year and finish off QE3 by the end of the year similar to what I suggested in the Monetary Policy (Part Two) section of our 2014 outlook. The big question now is whether the December number will be seen as a one-off setback particularly with the unemployment rate now within 0.2% of the Fed’s 6.5% threshold for action. Don’t forget that the ADP number released Wednesday painted a much stronger picture. It’s possible we may still see a small January taper of say $5 billion instead of $10 billion due to this and the debt ceiling negotiations. Next week focus turns toward earnings season but the shockwaves generated by today’s news could impact trading for the next several sessions. Corporate News Alcoa $0.04 vs street $0.06 Target Cut Q4 EPS guidance to $1.20-$1.30 from $1.50-$1.60 Economic News Significant economic announcements released yesterday afternoon and overnight include: US nonfarm payrolls 74K vs street 197K, previous revised up to 241K from 203K US private payrolls 87K vs street 200K, previous revised up to 226K from 196K US unemployment rate 6.7% vs street 7.0% Canada jobs change (45K) vs street 14K vs previous 21K Canada unemployment rate 7.2% vs street 6.9% Canada full-time (60K) vs previous 1K Canada part-time 15K vs previous 20K China trade balance $25.6B vs street $32.1B China exports 4.3% vs street 5.0% China imports 8.3% vs street 5.0% India trade balance ($10.1B) vs previous ($9.2B) India industrial production street 0.8% France industrial prodn 1.5% vs street 0.9% France manufacturing prodn 1.6% vs street 1.5% Spain industrial output 2.7% vs street 2.2% UK same store sales 0.4% vs street 0.8% UK industrial production 2.5% vs street 3.0% UK manufacturing production 2.8% vs street 3.3% UK construction output 2.2% vs street 7.5% Economic reports due later today include: 3:00 pm GMT UK NIESR GDP estimate previous 0.8%