US jobs revised downward
UK manufacturing PMIs declined to 52.8 in January, the second-lowest reading since July 2016 and new orders growth was weak. Further aggressive stockpiling maintained concerns that growth would not be sustained. The Pound had already slipped and the data failed to trigger any rebound with further concerns that uncertainty would undermine activity, especially as the EU holds form on renegotiations. The Euro made significant gains, pushing the Pound back to 1.1365 before a rise in oil prices allowed Sterling to push back to 1.1430 while there was further resistance on approach to 1.3100 against the Dollar.
Theresa May will push an EU response to alternative Northern Ireland backstop plans and the Pound will be sensitive to any response given. Unease surrounding the UK auto industry is negatively affecting the Pound this morning as markets monitor Brexit rhetoric.
Headline US employment data was substantially above consensus forecasts for the second month running with an increase in non-farm payrolls of 304,000 for January, an eleventh-month high. compared with market expectations of around 170,000. There was, however, a sharp downward revision of 90,000 for the December figure.
Unemployment increased to 4.0% from 3.9% previously as the number of employed people in the household survey declined. The monthly increase in average hourly earnings was held to 0.1% compared with market forecasts of 0.2% with the year-on-year increase held at 3.2%. The ISM manufacturing index strengthened to 56.6 for January from a revised 54.3 previously. The orders index also strengthened greatly to 58.2 from 51.3 previously which should ease concerns over the growth profile.
Eurozone CPI inflation fell to 1.4% for January, down from 1.6%, which then seemed to be the theme for other data. Fears of Italy were only compounded when their PMI numbers came out at a five-year low, and wider Eurozone PMI figures followed suit by coming in at a four-year low.
Versus the Dollar, the Euro has been somewhat consolidating its losses by trading in the 1.1400s after topping 1.1500 last week due to a dovish Fed decision. The Dollar is still seen as a safe haven, with Italy in recession and both France and Germany seeing a slowdown in growth.
Data today includes PMI construction numbers for the UK, CPI numbers out of Italy, PPI numbers from Europe and a speech from the European Central Bank’s (ECB) Mersch. This week will be fairly quiet on the data front, save from the Bank of England’s (BoE) interest rate decision on Thursday.
Data to watch:
00:30 AUD Building Permits (MoM) (Dec)
08:30 ECB’s Mersch speech
09:30 GBP PMI Construction (Jan)
15:00 USD Factory Orders (MoM) (Nov)