This month’s US nonfarm payrolls were absolutely spectacular coming in over 300K for the first time since January 2012. The result beat the street by over 80K and combining that with a 30K upward revision to last month indicates a very robust labour market in the US. Meanwhile hourly earnings were above 2% over year again, indicating inflation pressures remain intact.
This has boosted the case of the hawkish side at the Fed. Already this week, FOMC Vice-Chairman Fischer had hinted that some change to the “considerable time” guidance could be coming and this results may spark speculation that the Fed may have more to say on interest rates and its timetable to rate increases at its meeting and press conference later this month.
Speculation of an even more hawkish Fed relative to other central banks has USD soaring against pretty much everything, particularly JPY which has jumped above 121, and also NOK and SEK. AUD and NZD along with continental currencies are in the middle of the pack while GDP and CAD are down the least.
The loonie has not taken a very big hit relatively speaking despite a decrease in headline Canadian jobs. A small drop like the one we had is not unusual after two huge increases, and all of the net losses were part-time so the street appears to be taking the results in stride. With Canada benefitting from the US strength the Bank of Canada is one of the banks least likely to bring in new stimulus while the Bank of England may be one of the first to raise rates along with the US. Because of this, CAD and GBP have fallen the least against the surging USD.
Gold has dropped back under $1,200 today while Brent crude has fallen under $70.00 on the rally in USD. Meanwhile the Dax
is having a stronger day than the Dow amazingly enough on speculation that the ECB may be preparing more stimulus to announce at its meeting next month. Meanwhile banks in Europe keep paying back their old LTRO loans to the tune of €14B next week meaning the ECB has to do that much more to grow its balance sheet.
With the Fed and ECB apparently heading in opposite directions, other central banks diverging on monetary policy, economies moving at different speeds and a market share war underway in the oil market, there are a lot of divergences and cross currents running through markets that could keep trading active and create opportunities right through to the holidays.
Bank of Nova Scotia $1.32 vs street $1.37
National Bank of Canada $1.14 vs street $1.17
Economic reports released overnight and this morning include:
US nonfarm payrolls 321K vs street 230K previous revised up to 243K from 214K
US private payrolls 314K vs street 225K
US unemployment rate 5.8% as expected
US avg hourly earnings 2.1% as expected
US participation rate 62.8% as expected
Canada employment change (10K) vs street 0K and previous 43K
Canada full-time jobs 5K vs previous 26K
Canada part-time jobs (16K) vs previous 16K
Canada unemployment rate 6.6% as expected
Canada trade balance $0.1B as expected
US trade balance ($43.4B) vs street ($41.2B)
Germany factory orders 2.4% vs street 0.0%
Spain industrial output 1.2% vs street 1.5%
Sweden industrial production 0.1% vs street 0.2%
Norway industrial production 1.6% vs street 0.4%
Eurozone GDP 0.8% as expected
Economic reports due later today include:
10:00 am EST US factory orders street 0.0%
FOMC members Fischer and Mester speaking