US Employment Report in the Limelight Today

In the final session of the week, markets will be closely scrutinising the US employment report due out today, for signs of any weakness in hiring by US employers. Recent economic data from the US has been somewhat disappointing. As a result, today’s jobs report for January will draw significant market attention as robust jobs growth is consistent with US expansion. Also, the US unemployment rate and a measure of wage inflation will be tracked for signs of a healthier economy. 

In other economic news, German factory orders fell more than anticipated in December, suggesting that Europe’s biggest economy ended 2015 on the back foot. Meanwhile, it is a data empty day in the UK docket today. 

Pound Sterling – UK Markets

Yesterday, the Bank of England (BoE) published its first quarterly inflation report of the year, lowering its growth forecasts for 2016 and 2017 amid a weak global backdrop. Along with the economic forecasts, the central bank had its monetary policy meeting, wherein all policymakers agreed to leave the benchmark interest rate at a record low of 0.5%. Although the rate decision was widely anticipated, the vote switch by the BoE’s only policy dissenter, Ian McCafferty, for the first time since July 2015 was unexpected. Initially, minutes of the policy meeting seemed to have adopted a dovish take, but the BoE Governor’s speech that followed sounded more hawkish as he stated that the MPC’s next move in interest rates will be up. The Pound – US Dollar currency pair briefly turned lower with the release, slipping below the 1.46 mark.

Sterling has continued its gradual descent against the US Dollar this morning. In the absence of key economic indicators in the UK docket today, investors focus will turn towards the noteworthy US non-farm payrolls data, due later today, for further direction.

US Dollar – US Markets

The greenback has edged higher against the Pound and the Euro this morning in anticipation of the closely monitored US jobs report which is scheduled for release later in the day. Expectations are that US employers added fewer jobs in January and the unemployment rate remained steady. Meanwhile, average hourly wage earnings are expected to have climbed last month. Of late, commentary by some of the Federal Reserve (Fed) officials have signalled that the central bank is backtracking from its own rate rise expectations as recent data from the US have been getting steadily worse. Also, the financial turmoil at the start of 2016 partly reflects growth concerns and uncertainty about the true state of the economy. As a result, today’s non-farm payrolls report will be closely scrutinised by the Fed for some fresh optimism in the New Year. 

Meanwhile, weekly jobless claims data that was published yesterday indicated that the US labour market has lost some momentum. Additionally, the Labour department indicated that productivity of US workers fell sharply in the final three months of 2015.

Euro – European Markets

The Euro has failed to sustain previous session gains against the US Dollar this morning. In economic news, data showed that German factory orders declined more than expected in December, after very strong figures in the previous two months. The pullback in new factory orders was attributed to lower demand at home and in other Euro zone economies. However, a rise in demand from nations outside the Euro area, limited a further fall in the nation’s factory orders. Separately, French trade deficit narrowed more than anticipated at the end of 2015, as imports fell faster than exports. Data revealed exports of aerospace and space goods held up, while imports of aeronautics materials and chemical products fell in December. Additionally, the Bank of France reported that the nation’s current account deficit sharply narrowed in December. Amid no further data in the Euro calendar today, traders will watch out for today’s US jobs report for further cues.

The Euro traded higher against the US Dollar yesterday after the ECB President’s motivational speech to combat low inflation in the Euro region bolstered the local currency.

Other Currencies – Highlights

The Aussie Dollar has trimmed part of its earlier gains against the US Dollar today, with the currency pair currently trading below the 0.72 mark amid a broad recovery in the greenback. The pair retreated after data released earlier today showed that retail sales in Australia registered no growth in December from the previous month, reflecting some impact from mortgage rate increases in the past few months. However, results were much brighter for the full year as retail sales continued to grow annually, hinting that consumer spending plans were more upbeat than the previous year.

Apart from data releases, the monetary policy statement of the Reserve Bank of Australia’s (RBA) February meeting was released today. The RBA did not offer any new surprises as it maintained its growth forecast even as its largest trading partner, China, remained a prominent concern for the nation’s economic outlook. However, the central bank did lower its first half of 2016 forecast for inflation from 2.0% to 1.5%. The RBA left the door open for further easing, if necessary to lend support to demand.