- Preview: December non-farm payrolls by the numbers
- Crude oil settles at $73.82
- Hamas says it's studying the latest ceasefire proposal
- A Qatar official says there is no ceasefire deal for Gaza yet
- Al Jazeera deletes tweet saying Israel agrees to pause fighting
- SocGen now sees the Bank of Japan raising rates to 0% in March
- Atlanta Fed GDPNow rises to 4.2%.
- Al Jazeera: Qatar says Isreael has agreed to a ceasefire proposal.
- Why bonds are ripping higher and the dollar is being pulled lower
- Banking worries are back and bonds are bid
- US construction spending for December 0.9% versus 0.5% expected
- US January ISM manufacturing 49.1 vs 47.0 expected
- US January S&P Global final manfacturing PMI 50.7 vs 50.3 prelim
- Canada S&P Global manfuacturing PMI 48.3 vs 45.4 prior
- February seasonals: The worst month of the year for the Nasdaq
- Kickstart your FX trading with a technical look at the EURUSD, USDJPY and GBPUSD
- US initial jobless claims 224K vs 212K estimate
- US Q4 prelim unit labor costs +0.5% vs +1.6% expected
- ForexLive European FX news wrap: BOE sticks to the status quo, dollar stays firm post-Fed
- Bailey Q&A: If we follow market path inflation would be above target for three years
- Bailey Q&A: We need to see evidence of services inflation easing back
- BOE's Bailey: We are not yet at a point where we can lower rates
- US January Challenger layoffs 82.31k vs 34.82k prior
- BOE leaves bank rate unchanged at 5.25% as expected
The day in the US session started with the USD as the strongest of the major currencies. At 8:30 AM ET, when the US initial jobless claims data and quarterly employment cost data was released and showed weakness, the dollar started to give up gains. Earlier - before the traditional time for economic releases - the Challenger job cuts came in at -82K which was the most announced layoffs going back to March 2023.
Later, after stocks opened and the KRE ETF of regional banks reached down over -5% as concerns about that sector has reignited (remember last year in the 1Q?). There was more dollar selling as yields in the US started to head lower and lower. The low yield in the 10 year reached 3.817% which was a new low for 2024. That took the yield down around 14 basis points.
Although the ISM Manufacturing came in stronger than expected at 49.1 vs 47.0 estimate, it still was below the 50 level indicative of a contracting manufacturing sector. Within the report, Employment came in at 47.1 vs 48.1 prior. With the US jobs report expected at 8:30 AM ET, the market is sensitive to weakness in jobs.
What is expected tomorrow?
- Consensus estimate +180K (range +120 to +290K)
- Private +155K vs +164K prior
- November +216K
- Unemployment rate consensus estimate: 3.8% vs 3.7% prior
- Participation rate: 62.5% prior
- Prior underemployment U6 7.1%
- Avg hourly earnings y/y exp +4.1% y/y vs +4.1% prior
- Avg hourly earnings m/m exp +0.3% vs +0.4% prior
- Avg weekly hours exp 34.3 vs 34.3 prior
All of those stories helped to reverse the USDs fortunes. At the end of day, the USD is now the weakest of the major currencies. The GBP is ending the day as the strongest.
In the UK today, the BOE kept rates unchanged. The vote was mixed with 2 members voting to raise rates, one voting to lower rates and 6 wanting to keep rates unchanged.
During his Q&A session, Andrew Bailey, the Governor of the Bank of England (BOE), conveyed a message indicating that the central bank is not in a position to reduce interest rates at the current moment, emphasizing that the prevailing bank rate is deemed appropriate given the circumstances. Bailey highlighted the complexity of the situation, noting that the mere return of inflation to its target level by spring does not signify that their mission is accomplished. He stressed the importance of maintaining a restrictive monetary policy for an extended period, the duration and intensity of which will be guided by incoming data.
Bailey pointed out the need for observable reductions in services inflation, which is known for its persistence, as a prerequisite for any policy adjustments. He underscored the necessity of looking beyond short-term trends in policy-setting, cautioning that services inflation could remain high in the upcoming months. While expressing hope that lower inflation would positively affect real economy expectations, Bailey insisted on requiring more evidence to substantiate this impact.
He firmly stated that an inflation rate reverting to around 2.7% is not a satisfactory outcome and emphasized the importance of achieving the 2% inflation target for the welfare of households. Bailey assured that the BOE would not prolong its current policy stance beyond what is necessary, despite market rate conditioning paths suggesting that inflation could remain above the target for a significant portion of the next three years.
Bailey also shared some positive developments regarding the economy, which have mitigated the necessity to signal potential rate increases. He refuted the notion that the central bank has only tackled the easier aspects of reducing wage growth, clarifying that the BOE does not require inflation to hit the target before considering rate cuts but rather needs evidence pointing towards this trajectory.
Since the Fed's decision yesterday, the central bank is still in the quiet period (I think it ends at the of day today), but BoC Governor Macklem did and he emphasized a cautious stance towards monetary policy, highlighting that the Bank of Canada (BoC) may consider further rate hikes if new developments lead to higher inflation. He stressed the importance of witnessing ongoing easing in inflationary pressures and a clear downward trend in underlying inflation before making any adjustments to the current policy stance. Macklem pointed out that government spending, which is estimated to grow at around 2.25%—slightly above the potential growth rate—could undermine efforts to reduce inflation if it were to increase further. Despite optimistic figures in November, he maintains a conservative outlook for Q4 growth, expecting it to be fairly weak. This approach underscores the BoC's focus on managing inflation carefully while monitoring economic growth trends.
Looking at other markets as the day comes to a close:
- Crude oil is down $1.83 or -2.44% at $74.01
- Gold moved higher on the back of lower yields and lower dollar has the price up $15.48 or 0.76% at $2054.59
- SIlver is up $0.23 or 1.00% at $23.15
- Bitcoin is higher from earlier NY trading with the price trading at $43,054.
In the US debt market, some of the flight to safety and reaction to lower jobs was given back into the close. The final numbers are showing:
- 2-year yield 4.208%, -2.0 basis points
- 5-year yield 3.816%, -6.4 basis points
- 10-year yield 3.84%, -8.3 basis points
- 30-year yield 4.121%, -9.4 basis points
Stocks ripped higher after tumbling yesterday. Hopes of a ceasefire in the Israeil helped along with lower yields. The final numbers are showing:
- Dow Industrial Average rose 369.54 points or 0.97% at 38519.85
- S&P index rose to 60.52 points or 1.25% at 4906.18
- NASDAQ index rose 197.62 points or 1.30% at 15361.63
After close Meta was the star as they matched earnings and revenue estimates and declared its first-ever dividend along with a share buyback. Shares are up over 13% in after-hours trading.