Morning Commentary: Jobs and Trade Data – What the Market Says

Foreign Exchange - Morning Commentary

Jobs and Trade Data – What the Market Says

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Alan Rose
Alan Rose
Foreign Exchange Head Trader
The U.S. UR for September dropped to its lowest level since December 1969 (Woodstock, Neil Armstrong on the Moon, Mets win the WS) from 3.9% to 3.7% beating expectations. The NFP component came in weaker at 134,000 against expectations of a gain of 185,000; there had been whispers of numbers approaching 300,000 and higher after the strong U.S. economic data earlier in the week, but the effects from the hurricane last month appear to have distorted the data. A major revision to August boosted that number from 201,000 to 270,000.
In addition, the key average hourly earnings (AHE) component for inflation watchers was relatively benign again. AHE came in at 0.3% with the YoY number dropping from 2.9% to 2.8%. The labor force participation rate was unchanged at 62.7%. Bottom line: markets ignored the NFP component due to weather distortions and U.S. interest rates are slightly higher on the session with the key U.S. 10-year bond yield at ~3.22% up by 3 bps.
The U.S. trade deficit for August was very large again and hit a six-month high as soybean exports fell sharply by 28%. The U.S. trade deficit for the year is up by 8.6% from a year ago.  Imports grew by 0.6% propelled by strong consumer demand and exports fell by 0.8%. A continued red flag for the ongoing U.S. – China trade war was the fact that the trade deficit with China was an all-time record of $38.6 B and will only add more fuel to the existing combative tone between the world's two biggest economies. Net on net, the U.S. dollar is slightly weaker overall.
  • The Indian rupee weakened to its all-time low after the central bank left interest rates unchanged at 6.5%. The post-meeting language remained supportive of growth while attempting to manage the inflation rate near 4%.
  • Germany reported strong August factory orders and higher PPI. Factory orders rose by 2.0% against expectations of 0.8% and PPI YoY rose to 3.1% from 2.9%. The euro is stronger on the session.
  • Canada reported both trade data and their jobs report for September. August trade data came in slightly stronger than expected and the September jobs report was also stronger than forecast. Canada created 63,300 jobs in September against expectations for a gain of 25,000, but part time job gains totaled 80,200 while full time job losses totaled 16,900. The UR remained unchanged at 5.9% and the labor force participation rate was also unchanged at 65.4. The Canadian equivalent of the AHE fell from 2.6% to 2.2%. The Canadian dollar is nearly unchanged from last night’s close.
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