The U.S. Dollar is trading in favorable ranges following strong labor figures that ease fears of a slowdown in Federal Reserve tightening. After FOMC Minutes were released at 2PM on Wednesday, the Bloomberg Dollar Spot Index fell 1.4% until Non-Farm Payrolls this morning revealed an additional 156K jobs in December.
More importantly, the November numbers were revised upward from 178K to 204K, which is excellent since September was the last month to see a 200K gain. The dovish Fed notes emphasized the importance of steady job growth and they are getting it. Chances of a Fed hike by end of Q1 stand at 31.0% for now. On average, USD has recovered half a percent of its losses from the last few days and momentum continues.
More data will be out at 10AM including Factory Orders and Durable Goods. It’s worth noting that wage figures also came out earlier exceeding expectations. Dollar could rally on divergence in economic performance since data elsewhere disappointed overnight.
The Euro is falling in our North American session as a result of poor sales figures in the strongest economy of the Euro-bloc. German Retail Sales fell 1.8% in November, a dramatic change from the year prior when the reading was a positive 3.2%.
Fundamentals in previous days have shown that the economy in Europe is improving and that QE has worked, but consumption is a main concern for European Central Bank officials. Naturally, Germany’s established policymakers now fear that a combo of insecurity from terror attacks along with economic frailty could unseat them as well as the chancellor.
The Pound dropped in value after NFP data in the U.S. although it had jumped by as much as 1.7% during the first week of 2017. Other than American prosperity lifting the “buck” over the “quid,” market participants are worried that the Brexit process is not only being prolonged, which exacerbates uncertainty, but may be tougher than even previously imagined.
Prime Minister Theresa May is now looking for a new ambassador to the EU with enough knowledge of the inter-workings while also in favor of separating smoothly. That seems a lot to wish for now. Parliament is likely going to have to vote to approve invoking the dreaded Article 50 to officially leave. Hard Brexit may not be the worse to come yet.