A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.
Jobs, Jobs, Jobs
Share this story:
Andrew Kositkun Foreign Exchange Head Trader
Both the US and Canada published key jobs reports today and both countries hit it out of the park.
Canada payroll data showed the economy adding 34.5k jobs against consensus for 17.5k jobs with the prior number revised down marginally. The unemployment rate also dropped down to 5.5% and, most notably, wage data showed an acceleration to 4.4% which is near the cycle high.
In the US, payrolls also firmly beat expectations with the report showing 225k jobs added to the economy against expectations for 165k additional jobs. While there is some noise in this series, it is notable that the 3 month NFP average has moved to its highest level of the last 12 months. The unemployment rate did tick up slightly to 3.6% from 3.5% and average hourly earnings missed on MoM (0.2% vs. 0.3%), however, wages rose on YoY terms (3.1% vs. 3.0%).
While both these employment reports were positive, it is likely that neither changes the near term narrative for either country, a belief that is supported by today’s price action. After initially spiking stronger, the CAD has quickly given up all its gains. In Canada, the preferred measure for the BoC is monthly growth and the output gap rather than the employment report and the unemployment rate. With the recent downgrades to the global economy, as well as downside risks from the coronavirus still looming, the BoC is unlikely to shift away from its dovish bias.
In the US, the recent run of dollar strength is likely to continue. Recent growth revisions have been to downgrade global growth as coronavirus concerns continue to persist. This elevated level of uncertainty has supported anticyclical assets such as the USD. Moreover, the strong US payroll number adds further support to the view of a resilient US economy versus the rest of the world that appears less certain.
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
RBA released its Statement on Monetary Policy overnight and reaffirmed the bank’s optimistic outlook even as recent events create downside risk to domestic and global growth. This underscored the RBA’s willingness to wait and watch. As a result, markets have gone from pricing in ~42 bps of cuts this year to pricing in only ~30 bps of cuts within the span of 5 days. However, the AUD is one of the G10’s worst performers as the markets are looking through these positive comments and focusing on coronavirus concerns and its economic impact.
German industrial production came in well below expectations at -6.8% versus expectations for a -3.7% print. Industrial production in France also disappointed, printing -2.8% versus expectations for -0.3%. Poor European data combined with the strong US jobs report has put the euro under renewed pressure.
Emerging Asian countries continue to put an emphasis on stimulus as a way to counter the impact of the coronavirus. Thailand and the Philippines cut rates this week with India injecting liquidity. Additionally, courts in Thailand have ordered parliament to vote on a stalled budget bill, calling it an urgent matter.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Non-deposit investment products:
Are not FDIC insured,
Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and
Are subject to investment risks, including possible loss of the principal invested.
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. City National Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Now accepting scholarship apps Celebrating 40 years of service -- A loan to an innovative company -- Affording your dream home -- Mergers and a new branch in Raleigh View this email in your browser Forward to a friend
Your Market News update for May 30, 2019 | View online Market News News that's moving the market now As Trade-War Worries Linger, Market Seems to Lack Buying Conviction May 30, 2019 8:40 AM | JJ Kinahan 6 min read | Daily Market Update