Dollar slightly softer post US jobs report
Yesterday’s employment report in the US was something of a mixed bag. The economy added more jobs than expected in September but the unemployment rate came in slightly higher than forecast. The report didn’t alter expectations for next month’s Fed meeting very much with the chances of a rate cut raised a little but still seen well shy of 50/50. The euro and sterling fell to lows versus the dollar of close to $1.15 and circa $1.3050 immediately before the release of the jobs data and are trading modestly higher this morning at $1.1550 and $1.31 respectively. EURGBP remains in a relatively tight range, trading at around £0.8825. Retail sales data released in the UK a short time ago were a good bit weaker than expected but this hasn’t had any impact really on the pound.
US government bond yields finished 5-6bps lower across the curve, partly in response to the employment report but mainly in tandem with a sharp (US-led) fall in equity markets. UK yields edged down by a couple of basis points or so, while German yields ended broadly flat once again. The positive boost to equity market sentiment from Nvidia’s better than forecast results proved very short-lived indeed. US stocks reversed course sharply, giving up early gains to end down around 1.6% in the case of the S&P 500 and 2.2% lower in the case of the Nasdaq (the latter is now down around 8% from its all-time highs at the end of October). European stocks added 0.5% yesterday but finished well off their best levels of the day.
The US economy added 119k jobs in September, well ahead of the expected increase of 50k, though there were downward revisions to the previous couple of months’ data. Employment growth averaged just over 60k a month in Q3, much the same as in the second quarter (+58k). However this wasn’t sufficient to prevent the unemployment ticking up through the third quarter, reaching a four-year high of 4.4% in September (up from 4.1% in June).
Retail sales volumes in the UK fell by 1.1% month-on month in October, the first monthly fall since May this year. According to this morning’s release, “supermarkets, clothing, and mail order retailers fell last month, which some retailers attributed to consumers delaying their spending in the lead up to Black Friday.” The picture over the three months to October was solid enough though, with sales volumes increasing by just over 1% versus the three months to July. Separately, consumer confidence dipped in November according to the GfK indicator, with the impending budget weighing on sentiment perhaps.
For the day ahead, flash PMIs for November are due in the Euro area, UK and US. The ECB publishes its negotiated wages indicator for the Euro area, while the University of Michigan publishes the final reading for US consumer confidence in November. There are a good number of ECB (including Christine Lagarde) and Fed members scheduled to speak over the course of the day.