unemployment

Buying Momentum Falters Asian markets pushed higher overnight, with the exception of the Shanghai Index, which was nursing losses following dismal Chinese industrial profits. Europe also started in the black, although European bourses were back in the red by midway through the European session.

The price action so far today is emblematic of a textbook “risk off” day: stocks are falling across the globe, oil is trading off by nearly 3%, bond yields are generally retreating, and the yen is the strongest performing major currency (though we would note that gold bugs still can’t seem to catch a break!).

USD/CAD fell sharply for a second day in a row on Thursday as a combination of factors helped to weigh on the US dollar while boosting the Canadian dollar. This USD/CAD drop has occurred immediately ahead of key Canadian jobs data for April to be released on Friday.

Most aspects of the US jobs data released on Friday morning disappointed expectations, but were unlikely disappointing enough to sway the Federal Reserve from its firm track towards higher interest rates through 2018 and beyond.

Monthly employment data will take center stage on Friday morning as the US Department of Labor will report on the number of jobs added to the US economy in April, the unemployment rate, and key wage growth figures.

The official US jobs report for February was released on Friday morning, and despite a stellar reading for job creation – 313,000 jobs added in February against prior expectations of around 200,000 – the data was mixed overall, as wage growth was weak and the unemployment rate was slightly higher than expected.

The official US jobs report for January that was released on Friday morning was highly positive, easily beating expectations on both the headline data and, very importantly, wage growth.

The first official US jobs data for 2018, covering January, will be reported on Friday morning by the US Department of Labor. Consensus expectations are pointing to an anticipated improvement in non-farm payrolls (NFP) over December’s disappointing outcome. Around 180,000 non-farm jobs are expected to have been added to the US economy in January following a worse-than-expected showing of 148,000 jobs added in December.

For the past week, all eyes have been on the World Economic Forum in Davos, Switzerland, where US President Trump and others moved markets, especially the US dollar, with their comments.

Friday’s simultaneous release of US and Canadian jobs data for December resulted in USD/CAD extending its sharp slide of the past three weeks. Friday’s plunge was driven in large part by the contrast between the US and Canadian employment data, as the US headline number fell significantly short of expectations while Canada’s job creation in December far exceeded forecasts.

The official US jobs data for December will be reported on Friday morning by the US Department of Labor, and consensus expectations are pointing to a likely continuation of the strong job creation that prevailed through much of last year (September weather disruptions notwithstanding).

The euro clearly had a stellar year against the struggling US dollar in 2017, as was displayed by the EUR/USD rise from a low around 1.0350 in the beginning of last year up to a multi-year high just shy of 1.2100 in early September, for an overall 2017 range of approximately 17%.

The US jobs report for November was released on Friday. Although the headline non-farm payrolls number came in significantly better than expected at 228,000 jobs added in November against a prior consensus forecast of around 200,000 jobs, wage growth turned out lower than expected.

Looking ahead this week, several key data releases will likely have a significant impact on AUD/USD.

On Friday, the official US jobs data for October will be reported, and expectations for a sharp bounce-back from September’s weather-related negative reading are high.

The week ahead will be an exceptionally busy one in terms of key macroeconomic events and data releases. Most importantly, the US Federal Reserve, Bank of England, and Bank of Japan will be announcing their respective monetary policy decisions. These decisions will then be followed by the highly anticipated US jobs report at the end of the week.

While last week’s highly disappointing US non-farm payrolls release was generally discounted by the markets due to the expected impact of two hurricanes that negatively affected US job growth in September, greater-than-expected wage growth and a lower unemployment rate were significant bright spots in the data. With respect to wage growth, a key indicator of inflation, average hourly earnings jumped up +0.5% in September against both a prior consensus forecast of +0.3% as well as the previous month’s +0.2% revised reading. This surprisingly elevated wage growth data is likely to play a role in boosting the prospects for a December interest rate hike by the Federal Reserve. The current week features more US economic releases that will also play a key role in helping to set the tone for both Fed policy and the US dollar going forward.

Overall, the jobs report for September was mixed, with substantial deviations from expectations in both directions. Since a significant impact from the hurricanes had already been expected, however, the decline in jobs was seen more as an anomaly rather than any negative indication of the US employment landscape.

On Friday, the new jobs data for September will be reported, and due to the substantially adverse effect of recent hurricanes (Harvey and Irma) on the US economy, it is widely expected that September’s job growth was negatively impacted.

The calendar heats up in the week ahead for the start of October and the fourth quarter with major scheduled events and releases that are highly likely to make a substantial market impact, particularly on the currency markets. Anchoring the week’s calendar will be the heavily anticipated rate decision by the Reserve Bank of Australia, both the US and Canadian monthly jobs reports for September, and key purchasing managers’ index (PMI) data for the US and UK.

The headline non-farm payrolls data for July, released on Friday morning, substantially exceeded expectations at 209,000 non-farm jobs added against prior expectations of around 180,000. In addition, June’s number was revised up from the originally-reported 222,000 to 231,000.