Well, after a week’s development of data that promised nothing less than a stunning non-farm payrolls piece de resistance, Friday afternoon’s figures certainly were outstanding, but only in the sense of an anticlimactic conclusion to a week of encouraging private sector payrolls and jobless claims figures. Several indicators had suggested that payrolls would come in well to the top-side of prior expectations for a 150K or so rise, but the outcome was a 113K increase in private payrolls in December, with the headline rising 103K. The dollar weakened against the pound, with cable rising to $1.555, though ongoing concerns about eurozone debt issuance and fiscal sustainability meant the euro did not benefit, euro-dollar remaining below $1.30. This is unlikely to have any near term impact on US monetary policy, however, with Fed chairman Ben Bernanke warning over the weekend that while there is increased evidence of a self sustained recovery, the current rate of job creation was insufficient and a “considerable time” will be needed to right the jobs market.
Traders will be looking to this week’s round of US data for further direction. Top of the agenda will be Friday’s retail sales report for December, though inflation, industrial production and weekly jobless claims will also be closely watched.
The Euro will continue to be under pressure this week, with a number of auctions in the PIIGS that will be a key barometer of sentiment, Portugal in particular selling 2014 and 2020 bonds on Wednesday. There are ongoing reports that Portugal is being actively encouraged to apply for an EU-bailout. Meanwhile, investors have refocused on global recovery hopes over the last few weeks, and that trend is likely to continue again this week with a full calendar of releases, including interest rate meetings from the Bank of England and the ECB. While the ECB is universally expected to keep rates on hold at 1.0% this month, the post-Council meeting Press Conference will be closely watched for any indications as to how the ECB will backstop eurozone countries should the peripheral sovereign debt crisis reignite as governments start issuing debt.
For the UK, any sign that additional members of the Bank of England’s monetary policy committee are coming down on the side of either Andrew Sentance’s call for inflation-busting measures, or Adam Posen’s wish for further stimulus will have an impact on Sterling on Thursday. Minute’s from December’s meeting suggested that members were becoming more hawkish, and attentive to the rising threat of inflation. With rate rises certainly not expected this quarter, it may be the subsequent minutes release which will have a more significant impact.