Market Roundup
• US Jan job growth accelerates 227k v 175k forecast, 157k previous; wages lag 0.1% v 0.3% forecast, 0.2% previous
• US Jan labor force participation 62.9% v 62.7% previous, U6 underemployment 9.4% v 9.2% previous
• US Jan Markit comp final PMI 55.8 v 55.4 previous, Svcs PMI final 55.6 v 55.1 previous
• US factory orders +1.3% v 1% forecast, -2.3% previous, non-defense Cap ex-air m/m 0.7% v 0.8% previous
• US ISM N-Mfg PMI 56.5 v 57 forecast, 56.6 previous; ISM N-Mfg employment Index 54.7 v 52.7 previous
• Fed's Evans sees fiscal boost to US growth, wants slow rate hikes
• Fed’s Williams: sees some arguments for March hike, 3 rate hikes in ’17 would move
Fed closer to halting portfolio reinvestments.
• Bank of England back in Brexit spotlight after growth rethink.
• BoJ - Balance sheet/Trump mean a losing battle on 10yr JGBs.
• Trump administration imposes fresh Iran-related sanctions; oil rises.
Looking Ahead - Economic Data (GMT)
• 00:00 Japan Overtime Pay Dec -1.3%-previous
• 00:30 Australia ANZ Internet Job Ads Jan -1.9%- previous
• 00:30 Australia Retail Sales MM* Dec forecast 0.3%, 0.2%- previous
• 00:30 Australia Retail Trade* Q4 forecast 0.9%, -0.1%- previous
Looking Ahead - Events, Other Releases (GMT)
• No Significant Events
Currency Summaries
EUR/USD is likely to find support at 1.0700 levels and currently trading at 1.0772 levels. The pair has made session high at 1.0797 and hit lows at 1.0754 levels. Euro inched higher against the dollar on Friday as the dollar declined after the U.S. employment report showed a smaller-than-expected rise in wages last month despite strong jobs gains, likely prompting the Federal Reserve to be less aggressive in raising interest rates this year. The greenback has struggled amid concerns about the Trump administration's preference for a weak dollar. Average hourly earnings rose just 0.1 percent, lower than the market's forecasts for a 0.3 percent increase. There was also a downward revision to the December wage growth. It posted its worst January in percentage terms in 30 years. The jobs report's dovish implications were reinforced late on Friday by Chicago Fed President Charles Evans, who said he favors gradual rate hikes. The greenback has struggled amid concerns about the Trump administration's preference for a weak dollar and focus on trade and immigration policies rather than fiscal stimulus and tax reform. It posted its worst January in percentage terms in 30 years. The euro which registered its sixth week of gains in seven, was at last trading at $1.0785, having climbed as high as $1.0829 after the latest signs that growth and inflation are rising in the euro zone.
GBP/USD is supported in the range of 1.2410 levels and currently trading at 1.2477 levels. It reached session high at 1.2520 and dropped to session low at 1.2456 levels. Sterling declined against dollar on Friday as sterling was weighted down after investors pushed back their expectations for a Bank of England interest rate hike and after disappointing services sector data. The Bank upped growth forecasts but declined to do the same on inflation, and pointed to interest rates staying on hold long into next year. That led investors to push back their expectations of when the first hike in a decade would come, with investors now pricing in only around a 1 in 3 chance of a hike this year, down from a 1 in 2 chance before the BoE report. Growth in Britain's services sector slowed for the first time in four months in January as businesses battled the sharpest rise in their costs in more than five years, a closely watched survey showed on Friday. The Markit/CIPS services purchasing managers' index (PMI) dropped to 54.5 from December's 15-month high of 56.2, just below its long-run average and at the bottom end of a range of forecasts of economists. Sterling slipped to as low as $1.2457 on Friday, leaving it around two-and-a-half cents weaker than a seven-week high above $1.27 touched on Thursday.
USD/CAD is supported at 1.2965 levels and is trading at 1.3028 levels. It has made session high at 1.3037 and lows at 1.2989 levels. The Canadian dollar strengthened against its U.S. counterpart on Friday but clawed back some losses after U.S. jobs data showed tepid wage growth, while the loonie ended higher for the second straight week. U.S. job growth surged more than expected in January, but a smaller-than-expected increase in wages reduced pressure on the Federal Reserve to raise rates in the near term. U.S. crude prices settled 29 cents higher at $53.83 a barrel after the United States imposed sanctions on some Iranian individuals and entities. It was the second straight week that the Canadian dollar had ended higher and the fifth in the last six weeks. On Tuesday, it touched its strongest in more than four months at C$1.2969. For the week, the loonie gained 0.8 percent, helped by domestic data that showed the economy expanded faster than expected in November and the manufacturing sector grew at its fastest pace in over two years in January, while it has been absent from a list of currencies attracting the ire of U.S. President Donald Trump.
AUD/USD is supported around 0.7630 levels and currently trading at 0.7678 levels. It hit session high at 0.7694 and made session lows at 0.7664 levels. The Australian dollar held near 12-week peaks against the U.S. dollar on Friday after U.S. wages remained nearly flat in January, reducing expectations of a fast interest rate-hike cycle in the coming months. Wages rose just three cents last month despite the largest gain in U.S. nonfarm payrolls in four months, a report showed. Investors bet the figures would keep the U.S. Federal Reserve on a trajectory of gradual interest rate increases, sustaining the allure of high-yielding emerging market assets. January's U.S. non-manufacturing index also showed a reading of 56.5, slightly lower than the market's 57.0 forecast. But the number remained higher than the 54.9 average for the whole of 2016. In late trading, the dollar index, which tracks the greenback versus six top currencies, was flat to slightly lower at 99.77.For the week, the Aussie is set to clock around a 1.5 percent rise. Since the beginning of this year, the Aussie has posted a weekly loss only once. It is up 6.3 percent so far in 2017, putting it among the best performing major currencies.
Equities Recap
European shares ended a mixed week on a positive note on Friday, helped by well-received company earnings and buoyant economic data, while mining stocks were hit by weaker metal prices.
UK's benchmark FTSE 100 closed up by 0.8 percent, the pan-European FTSEurofirst 300 ended the day up by 0.70 percent, Germany's Dax ended up by 0.3 percent, France’s CAC finished the day up by 0.8 percent.
U.S. stocks climbed on Friday, with the S&P 500 closing just short of a record high, boosted by gains in financial shares as President Donald Trump moved ahead with deregulation action and by a strong payrolls report.
Dow Jones closed up by 0.92 percent, S&P 500 ended up 0.71 percent, Nasdaq finished the day up by 0.53 percent.
Treasuries Recap
The U.S. Treasury yield curve was the steepest in one-and-a-half months on Friday after the jobs report for January showed disappointing wage growth, indicating inflation is not rising at a pace that would lead the Federal Reserve to raise rates in the near-term.
The yield curve between 5-year notes and 30-year bonds steepened to 120 basis points, the widest since Dec. 14.
Benchmark 10-year notes fell 6/32 in price on the day to yield 2.49 percent, after the yields fell as low as 2.43 percent after the jobs data.
Commodities Recap
Gold was little changed on Friday, erasing earlier losses as the dollar came under pressure from a U.S. payrolls report that flagged up weak wage growth last month, weakening the case for near-term interest rate hikes.
Spot gold was unchanged at $1,215.75 an ounce by 2:25 p.m. EST (1925 GMT), off an earlier low of $1,207.10. U.S. gold futures for April delivery settled up 0.1 percent at $1,220.80 per ounce.
Oil prices rose on Friday after the United States imposed sanctions on some Iranian individuals and entities, days after the White House rebuked Tehran for a ballistic missile test.
Front-month U.S. West Texas Intermediate crude futures settled up 29 cents, or 0.5 percent, to $53.83. The contract gained more than 1 percent for the week.
Brent crude futures settled 25 cents higher at $56.81 a barrel, giving it a 2 percent gain on the week, the first significant weekly rise this year.
