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Nonfarm payrolls undermined by peanut-sized wages

Nonfarm payrolls undermined by peanut-sized wages

Article 50 is still a concern for markets with the government facing another round of parliamentary votes this week. There is the potential for legal challenges which could jeopardise the planned timetable for triggering Article 50. The result is of little doubt however, with a fresh legal challenge refused and the Labour Party still committed to supporting the Bill even without amendments. However, uncertainty over the next few days will have a significant impact.

The only UK data of note on Friday, the PMI services sector index, declined to 54.5 for January from 56.2 the previous month. The data had a significant impact in curbing Sterling support with a decline to below 1.2500 against the Dollar as the Euro strengthened to below 1.1630.

Eurozone PMI Services index for January was revised slightly higher to 53.7 from 53.6 previously. However, there was muted market impact due to continuing expectations that the European Central Bank (ECB) will look to maintain its aggressive policy stimulus. Retail sales fell to 1.1%, down from 2.5% last January. The Euro rallied towards 1.0800 against the Dollar without being able to break higher with consolidation below this level today despite strong German factory orders data.

Friday’s nonfarm payrolls confounded expectations with 227,000 new jobs in January; 175,000 was predicted. Friday’s data was up from 157,000 in December. The unemployment rate increased to 4.8% from 4.7% and there was a notably weaker than expected figure for average earnings at 0.1%. Annual average earnings dipped to 2.5% from 2.9%, dampening expectations of an interest rate increase in March.

The ISM non-manufacturing index was slightly weaker than expected at 56.5 from a revised 56.6, but prices rose strongly. Chicago Fed President Evans maintained that he expected two US rate hikes in 2017 whilst reiterating his preference for lower unemployment to support inflation. San Francisco head Williams stated his preference for a hike relatively soon.

Data to watch: Labour Market Conditions Index (Jan).

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