FXStreet (Delhi) – Derek Halpenny, European Head of GMR at MUFG, suggests that with financial markets a little more orderly, attention will shift to the jobs report from the US this afternoon.
Key Quotes
“The ADP employment increase of 257k means the true consensus this afternoon may be a little higher than the Bloomberg reported 200k. Jobs reports are of course always important but this one comes ahead of the FOMC at the end of this month (27th) when the FOMC will not be altering monetary policy and hence perhaps its importance is slightly less. It would certainly take a report quite wide of consensus to garner any notable shift in market expectations. It’s basically a given that the US is close to full employment and the debate now is really centred on when that will translate into higher inflation.”
“With a much greater emphasis from the FOMC on “actual inflation”, the earnings data in today’s report has certainly taken on greater importance. However, we shouldn’t get too carried away with the probable notable bounce in the annual growth rate in average earnings this afternoon. The market expects a jump from 2.3% to 2.8% but this reflects the dropping out of the -0.2% December 2014 m/m reading from the annual calculations. That will reverse in January when the +0.6% reading in January 2015 falls out of the annual rate.”
“Having said that, the underlying trend is clearly upward which will be crucial in helping lift “actual inflation” in 2016. Our own NFP model is giving us an estimate of 176k for today’s report which is a little weaker than the consensus but not weak enough to really spark any great shift in expectations. There are two more reports before we have the March FOMC meeting which is when the probability of a rate increase is much more finely balanced. A +/-50k from the 200k consensus is probably required in order to get any notable dollar move this afternoon.”
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