North American employment reports came, we saw and they have been trying to conquer the risk trade ever since. It certainly was a mixed bag of data to end ‘this’ of all weeks on. Canada did a U-turn, and provided us with as many job losses (-18.7k) as positives (+18.6k) the market had been expecting. Unlike its southern neighbor, the unemployment rate inched higher (+7.4%). In contrast, the US hit headline expectations (+120K) and gave us some strong positive revisions. The unemployment rate firmly beat everyones expectations (+8.6%), however, the labor force participation rate eased to a 28-year low (+64%) as people dropped out in droves, either because they are retiring or simply too discouraged to continue looking for employment. It was driven by a drop of-315k in the labor force and a big-594k drop in the number of unemployed despite just +120k more people getting work.
Below are some other highlights of the week:
Americas
- USD: The long-term foreign and local currency issuer default ratings of AAA were affirmed by Fitch. However, the outlook on the long-term rating was revised to negative from stable.
- CAD: Current account improved to CAD-12.13b in Q3 after CAD-16.14b in Q2.
- USD: Consumer confidence climbed this month (56 vs. 40.9) by the most in more than eight-years as Americans grew more upbeat about employment and income prospects.
- USD: US home prices eased in September from a month earlier, the first decline after five straight monthly increases according to S&P’s Case-Shiller.
- Most of the world’s major central banks (Fed, ECB, BoE, BoJ, BoC and SNB) agreed that they would take “coordinated actions to enhance their capacity to provide liquidity support to the global financial system.†Specifically the Banks have cut the price on existing temporary US dollar swap arrangements to USD OIS plus 50bp which is a cut of about 50bp from what is currently charged. It will apply this from December 5 to February 1 2013.
- CBanks: Agreed to set up bilateral liquidity swap arrangements to cover any of their own currencies should that be needed.
- US fundamentals are again doing their bit. The ADP employment report suggested that jobs rose +206k last month, a hefty +76k above consensus. Pending home sales surged +10.4% in October and the Chicago PMI rose to 62.6 from 58.4.
- CAD: Q3 GDP annualized +3.5% vs. market expectations of +3%. Q2 revised to -0.5% from -0.4%. September GDP +0.2% from August.
- USD: New jobless claims rise to +402k, largest level in more than a month. This suggests that labor markets are healing but very slowly.
- USD: ISM November manufacturing PMI rises to 52.7 vs. Octobers 50.8. However, the employment index fell to 51.8 vs. Octobers 53.5.
- CAD: November full-time jobs +34.6k, part-time -53.3k giving us a monthly loss of -18.7k. The participation rate at +66.6% eased a tad from +66.7% while the unemployment edged higher to +7.4% vs. +7.3%.
- USD: NFP headline print was up +120k, private up +140k. The prior month revisions were significantly positive with September +52k to +210k and October +20k to +100k. The unemployment rate eased a whopping-4 ticks to +8.6% (the lowest level in two-years). Does this take QE3 off the table? However, the labor force participation rate eased from +64.2% to +64%-lowest level in 28-years. It seems that people dropped out of the workforce in droves, either because they are retiring or simply too discouraged to continue looking for employment. Monthly paychecks also slipped as average hourly wages fell-0.1% (second negative in three-months).
WEEK AHEAD
- Central bank decisions come to us from AUD, NZD, BoE, EUR and CAD
- CHF delivers its CPI outlook
- Services and non-manufacturing PMI is released in CAD, GBP and USD
- CAD gives us building permits and housing starts
- AUD announces its GDP outlook and employment situation
- Trade Balance in reported in USD and CAD
- The week ends with USD’s Prelim UoM Sentiment
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Dean Popplewell
He has a deep understanding of market fundamentals and the impact of global events on capital markets.
He is respected among professional traders for his skilled analysis and career history as global head
of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean
has played an instrumental role in driving awareness of the forex market as an emerging asset class
for retail investors, as well as providing expert counsel to a number of internal teams on how to best
serve clients and industry stakeholders.
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