Daily Market Update

U.S. Job Creation & Euro-Zone Inflation Steady FX Flows

January 05, 2018

The U.S. Dollar is trading in choppy ranges as markets continue to digest data points from Europe and here at home.

USD

Non-Farm Payrolls figures came in below the expected 190K with just 148K jobs added in December. A revision of the prior month’s numbers was upgraded to show that 252K had been added instead of 228K as originally reported.

Overall, there seems to be balance in payrolls and this marks the seventh straight year of job creation fueling 2MM jobs annually. As of now, there is no damage to the dollar after initially falling to its main counterparts.

Wage growth met predictions of 2.5% growth, but the month before was revised downward slightly. In Europe, inflationary figures were underwhelming, confirming what the European Central Bank has said: the lack of inflation prevents a tightening agenda from moving forward. This helped the dollar stay afloat against the shared currency.

 

EUR

The Euro remained in high levels, around its 3-year best, but failed to see further gains after Consumer Price Index data revealed deflationary pressures. CPI had been averaging around 1.5% pace yearly, but now stands at 1.4%.

The sentiment for Euro appreciation is still strong, but economic indicators do not lie and CPI serves as evidence that the economy is not blowing out of proportion, thus the financial environment should remain accommodative. This means that if tightening is not guaranteed to be in the horizon, maybe EUR bulls should not expect much strengthening beyond current ranges.

 

GBP

The Pound continues to be the recipient of bad headlines as it pertains to Brexit, but it certainly dusts off all doubts of its shoulder. The banking sector in the UK is concerned about the EU’s strictness that no future deal will include maintaining banking the way it is now.

Chief negotiator Michel Barnier has warned the UK deal-makers to recognize that choosing to leave the union put banks at risks, thus there will not be favoritism towards the London financial sector when coming up with new trading terms. Banks will be on their own and certainly, as mentioned before, many companies could leave for more interconnected European capitals. It does not matter as Sterling continues to stay at levels unmerited.

 

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