Friday October 7, 2016 - 20:25:18 GMT
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September U.S. Jobs Data Disappoint
John M. Bland, MBA
Lacklustre U.S. Jobs Data
The September U.S. Jobs data missed street expectations. The data were softer, but they were not a disaster. Non Farm payrolls increased by +156K in the month but fell short of expectations for a gain of 175K. Those citing the upward revision to the August data could be losing sight of the fact that August was also a miss. the rebound in Average Hourly Earnings got it back to where it has been for a couple of years. The unemployment rate at 5.00% is well above where it was in June (4.70%). Recall this is a cautious Fed. There is a chance it could still could plow ahead with a rate hike in December, but we will need a strong November number first.
Late Thursday (early Far East) trading saw a nasty "flash crash" in the GBP. Some are blaming "Brexit", others suggest it was an option related trade. However, the root problem clearly was the growing lack of liquidity in a quiet market where institutional participation has been curtailed due to regulatory activity.
On Tuesday there was a press report carried by AFP, which said that the European Central Bank (ECB) was considering a tapering of Quantitative Ease (QE) by EUR 10bln per month. I reported the information but frankly did not believe the central bank was even close to such a decision. Then on Thursday, ECB VP Constancio (Portugal) said the report that ECB was near tapering its QE is wrong. He said QE would continue until inflation is back on target. Some say the central bank will mot even consider a QE taper until late 2017.
Current Market Conditions
Markets had been on edge heading into the September Jobs report, but were expecting strong data to solidify the case for a policy tightening in December. As a result the markets were positioned long dollars into the release. However, once again the bull USD scenario proved to be the risky one, with stops above the market triggered after the release. The GBP "flash crash" was upsetting for many because it came completely out of the blue and for no good reason. Many fear that sooner or later they could get caught in liquidity gap themselves, and that has some worried because illiquidity itself can breed more illiquidity.
WEEKLY HIGH IMPACT NEWS:
21:00 US- Presidential Debate
00:00 JP/CA/US (partial) Holiday
09:00 DE- ZEW Survey
18:00 US- Fed Minutes
11:00 GB- BOE Decison
15:00 US- EIA Crude
12:30 US- PPI
12:30 US- Retail Sales
14:00 US- prelim Univ of Mich
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland
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