Payrolls day in the US

The main currency pairs continue to trade in narrow ranges ahead of the latest employment report in the US today, and indeed in advance of next week’s Fed and ECB monetary policy meetings. The euro has dipped to around  $1.078 against the dollar this morning having traded above $1.08 for a time yesterday, while sterling is a little weaker against both euro and dollar trading at 85.8p and $1.256 respectively.

It is quiet enough in government bond markets too, with yields are edging up again this morning having closed a little higher yesterday. In equity markets, European stocks added around 0.7% in yesterday’s session while the S&P 500 in the US ended with similar gains.

The second estimate of Q3 Euro area GDP showed the economy contracted by 0.1% quarter-on-quarter, unrevised from the initial estimate. Consumer spending picked up in the quarter, increasing by 0.3% having been flat in Q2, while investment was unchanged having fallen slightly in the previous quarter, but both exports and inventories contributed negatively to GDP.

A Bloomberg survey of economists published this morning shows them at odds with the market regarding the timing and extent of ECB rate cuts in 2024. The median expectation is that the ECB will begin to lower rates by 25bps in June (the market is pricing in 40bps of cuts by April) and reduce them by a cumulative 75bps by year-end (the market sees rates being cut by a total of 150bps next year).

The key economic release today is the November employment (payrolls) report in the US. The consensus expects the economy to have added about 180k jobs last month, following an increase of 150k in October, with the unemployment rate seen holding at 3.9% and the annual rate of growth in hourly earnings expected to moderate further to 4% (from 4.1%).