Friday’s ‘Goldilocks’ inspired jobs report managed to rescue the US dollar from any continued demise last week, and the momentum has continued into the European opening today. The data beat expectations (175k jobs added against a consensus of 163k) although the unemployment rate ticked higher to 7.6%; the overall picture is not too hot, not too cold, but just right for the USD.
Wage stagnation alongside that increase in the rate of unemployment are concerns and we are still struggling to see how the Fed can taper away asset purchases if the overall trend of jobs growth is not one of improvement.
The accumulated good sentiment, plus the likelihood that traders were looking for the USD to reverse its losses after a particularly poor Thursday session, provided a nice rally that has had its heels clipped over the weekend. Once again, poor data from China was the culprit.
A slew of macroeconomic indicators missed expectations over the weekend; trade slid heavily, inflation missed expectations while investment and lending numbers were also down. It seems that the de facto position for looking at the Chinese economy is now one of disappointment and not just uncertainty. Imports in particular were concerning as they fell 0.3% against where they were this time last year – the market had been looking for an increase of around 6%.
The focus of today’s session will be, apart from any lingering thoughts around the US jobs picture, industrial and manufacturing numbers from France and Italy. Both have seen some improvement in overall data and last week’s PMI surveys showed that the recessionary rate of decay may be starting to slow.
That being said, we would have to disagree with France’s PM Hollande who told a group of Japanese businesses over the weekend that the crisis in Europe was ‘over’. Saying such a thing with the Cyprus situation only just in the rear-view mirror, and unemployment still at a record highs, looks at best ignorant and, at worst, downright stupid.