If not stated in clear enough terms on Friday, the US jobs report was about as strong as they come. Sure, the January change in nonfarm payrolls figure only beat by about plus 30,000, but the massive upward revisions, of almost plus 150,000, to the November and December data suggest that the US jobs market has even more momentum than previously believed.
This week, as I previewed in the “four things to watch this week” from Friday, let’s watch for the latest central bank news from the Bank of England, as the quarterly inflation report this Thursday is the bank’s most high profile opportunity to make its thoughts on the economy and the trajectory of monetary policy known.
The market has pushed the first BoE hike out into the very end of this year and even early 2016 after the two hawkish dissenters changed their votes to “no hike” at the last BoE meeting. As well, EURSEK is chomping at the bit near the top of the local range ahead of this Thursday’s Riksbank meeting, as we’re expecting further news on the whether we see QE now or later from the bank and if so, its composition and size will be the issues at hand.
Over the weekend, the new Greek leadership maintained a defiant stance on the EU austerity programme as every week from now will be a crucial one for the ongoing standoff over Greek funding and debt forgiveness. The EU finance ministers will be meeting Wednesday and there is an EU summit on Thursday.
In Greece, the standoff continues. Photo: Wikimedia Commons
Note the embarrassingly massive German current account number for December released this morning, showing that Germany is the greatest bad actor within the EU for not consuming more and providing strong ammunition for Germany’s critics.
Good and bad news for Australia over the weekend, as we saw a scary drop in Chinese imports, while Australia’s leader Tony Abbott survived a confidence vote that puts fears of political instability to rest for the now.
Chart: USDJPY
USDJPY rallied sharply on Friday’s strong US jobs report and the obvious focus at the moment is on the descending line of consolidation and the Ichimoku cloud level coming in near the same 119.25 area. A break of this level would argue for a test of the highs and even beyond if US rates continue higher from here as a fundamental support to this development. 
G10 rundown
USD: from a fundamental perspective, we should have the USD rally back on track after the strong Friday employment report and the jump in market anticipation of a Fed hike, which was moved sharply forward.
EUR: Friday saw the fourth direction change in four days, but hard to see what supports the currency after its latest sell-off as uncertainty over Greece is higher than ever and it is hard to see a solution materialising that clears the uncertainty this week as it appears the Greek leadership wants to take this to the edge and even over the edge if it has to.
JPY: was sharply weaker on Friday against the USD if not as much elsewhere, but if yields continue higher, the Japanese yen may receive more negative focus than previously. Watch the 119.25 area in USDJPY as the key technical level of the moment – see chart above.
GBP: Trying to hang on to the 1.5200/50 support area in GBPUSD while EURGBP is pressing the bottom of the range. Key BoE inflation report on Thursday tells us whether the market gets more interested in taking a view on GBP. In general, GBPUSD may remain capped below 1.5500 while EURGBP has potential for new lows for the cycle.
CHF: Could sustain a bid on the ongoing uncertainty over the Euro Zone and Russia as well, where we seem far from a solution to what may be an accelerating situation in Ukraine. The 1.0475 area is support and the 1.0625 level in resistance in EURCHF.
AUD: Prefer the downside against the US dollar, but watching for momentum to rebuild as we’ve gotten stuck in neutral over the last few days. A close below 0.7700 would help the argument for a move to 0.7500 and beyond.
CAD: more supported than AUD on strong oil prices and a good Canadian employment report on Friday, but strong support in USDCAD now at 1.2400 and possibly even at 1.2500 today after Friday’s strong US jobs number.
NZD: Trying to look higher versus AUD again, as 1.0500 is a big focus in AUDNZD. Looking for downside continuation in NZDUSD, but need to work down through 0.7300/25 to build a case for a bigger move toward 0.7000 eventually.
SEK: It’s all about the Riksbank meeting this week, with tremendous two-way surprise potential depending on what the bank has to say on QE on Thursday. 9.50 is an important level ahead of that meeting.
NOK: Not impressed by the currency as EURNOK posts a solid bounce despite news out of Europe and oil price bounce of late. Also, USDNOK has made a stand at the important 7.50 area.
Economic Data Highlights
- China Jan. Trade Balance out at +$60B vs. +$48.9B expected and vs. +$49.6B in Dec.
- Japan Dec. Adjusted Current Account Balance out at +¥977B vs. +¥941B expected and vs. +¥915B in Nov.
- Japan Jan. Consumer Confidence out at 39.1 vs. 39.3 expected and 38.8 in Dec.
- Germany Dec. Current Account Balance rose +25.3B vs. +20.8B expected and vs. +18.9B in Nov.
Upcoming Economic Calendar Highlights (All times GMT)
- Canada Jan. Housing Starts (1315)
- UK Jan. BRC Sales Like-for-like (0001)
- Australia Jan. NAB Business Confidence/Conditions (0030)
- China Jan. CPI and PPI (0130)
- Japan BoJ’s Morimoto to Speak (0130)