No Decisive Reaction to Mixed NFP, Dollar Staying Firm

Market overviews

At the time of writing, markets are still figuring out how to react to the mixed US non-farm payroll data. While the headline job grow was very disappointing, unemployment rate improved. More importantly, wages reported another month of strong growth. Canadian Dollar is trading mildly higher after strong job data, but there is no clear follow through buying yet. For, Sterling and Dollar are still the strongest ones for the week while Aussie and Kiwi are the weakest.

In Europe, at the time of writing, FTSE is down -0.05%. DAX is down -0.85%. CAC is down -0.65%. Germany 10-year yield up sharply by 0.052 at -0.047. Earlier in Asia, Nikkei dropped -0.03%. Hong Kong HSI rose 1.82%. China Shanghai SSE dropped -0.18%. Singapore Strait Times rose 0.66%. Japan 10-year JGB yield rose 0.0160 to 0.135.

US non-payroll missed expectation, but unemployment rate and wage growth beat

US non-farm payroll employment rose only 199k in December, much worse than expectation of 400k. Overall job growth averaged 537k per month in 2021. Non-farm employment remained -3.6m, or -2.3%, from its pre-pandemic level in February 2020.

Unemployment rate dropped to 3.9%, down from 4.2%, better than expectation of 4.1%. Number of unemployed persons dropped -483k to 6.3m. Labor force participation rate was unchanged at 61.9%, remain -1.5% below pre-pandemic level.

Average hourly earnings rose strongly by 0.6% mom, above expectation of 0.4%.

Canada employment grew 54.7k in Dec, way above expectation

Canada employment grew 54.7k in December, much better than expectation of 24.5k. Full-time employment rose 123k while part-time employment dropped -68k. Total hours worked dropped -0.3%, first decline since June.

Unemployment rate dropped from 6.0% to 5.9%, better than expectation of 6.0%. Labor force participation rate held steady at 65.3%.

Eurozone CPI accelerated to 5.0% yoy in Dec, another record

Eurozone inflation accelerated from 4.9% to 5.0% in December, above expectation of 4.7% yoy. That’s another record print since record began in 1991. CPI core was unchanged at 2.6% yoy, above expectation of 2.3% yoy.

Energy is expected to have the highest annual rate in December (26.0%, compared with 27.5% in November), followed by food, alcohol & tobacco (3.2%, compared with 2.2% in November), non-energy industrial goods (2.9%, compared with 2.4% in November) and services (2.4%, compared with 2.7% in November).

Eurozone retail sales rose 1.0% mom in Nov, EU up 0.9% mom

Eurozone retail sales rose 1.0% mom in November, much better than expectation of -0.5%. Volume of retail trade increased by 1.6% for non-food products and by 0.6% for food, drinks and tobacco, while it fell by -1.5% for automotive fuels.

EU retail sales rose 0.9% mom. Among Member States for which data are available, the highest monthly increases in the total retail trade volume were registered in Spain (+4.9%), Luxembourg (+4.0%) and Portugal (+2.8%). The largest decreases were observed in Austria (-4.1%), Latvia (-3.6%) and Croatia (-3.1%).

Eurozone economic sentiment dropped to 115.3 in Dec, EU down to 114.5

Eurozone Economic Sentiment Indicator dropped -2.3 pts to 115.3 in December. Employment Expectations Indicator dropped -1.6 pts to 114.0. Industry confidence rose from 14.3 to 14.9. Services confidence dropped sharply from 18.3 to 11.2. Consumer confidence dropped from -6.8 to -8.3. Retail trade confidence dropped from 3.7 to 1.1. Construction confidence rose from 9.0 to 10.2.

EU ESI dropped -2.1 pts to 114.5. EEI dropped -1.4 pts to 114.2. Amongst the largest EU economies, the ESI rose only in Poland (+0.6). By contrast, confidence worsened in the Netherlands (-4.1), Germany (-2.8), France (-2.1), Italy (-1.6) and Spain (-0.8).

Also released, Germany industrial production dropped -0.2% mom in November, versus expectation of 1.0% mom. Trade surplus narrowed to EUR 10.9B, versus expectation of EUR 12.7B.

France consumer spending rose 0.8% mom in November, versus expectation of 0.5% mom. Industrial output dropped -0.4% mom, versus expectation of 0.5% mom. Trade deficit widened to EUR -9.7B, versus expectation of of EUR -7.2B.

Swiss retail sales rose strongly by 5.8% yoy in November, versus expectation of 0.8% yoy. Unemployment ticked down to 2.4%, versus expectation of being unchanged at 2.5%.

UK PMI construction dropped to 54.3, worst phase of supplier delays passed

UK PMI Construction dropped from 55.5 to 54.3 in December, above expectation of 53.9. Markit said weakness centered on commercial and civil engineering segments. House building regained its place as fastest-growing category. Suppliers delay were the least widespread since November 2020.

Tim Moore, Director at IHS Markit: “UK construction companies ended last year on a slightly weaker footing… The worst phase of supplier delays seems to have passed… Input cost inflation moved down another notch…. The latest rise in purchasing prices was far slower than the 24-year peak seen last June.”

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9179; (P) 0.9202; (R1) 0.9235; More….

Intraday bias in USD/CHF remains mildly on the upside at this point. Fall from 0.9372 should have completed with three waves down to 0.9101. Further rally would be seen to 0.9293 resistance first. Break will likely resume the choppy rise from 0.8925 through 0.9372 resistance. On the downside, break of 0.9101 will resume the fall from 0.9372 instead.

In the bigger picture, the corrective structure of the rebound from 0.8925 argues that fall from 0.9471 is not complete yet. It could either be the second leg of pattern from 0.8756 (2021 low), or resuming larger down trend from 1.0237 (2018 high). We’d pay attention to the downside momentum and assess the odds later. But for now, medium term outlook will be neutral at best as long as 0.9471 resistance holds.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
23:30 JPY Tokyo CPI Core Y/Y Dec 0.50% 0.40% 0.30%
23:30 JPY Labor Cash Earnings Y/Y Nov 0.00% 0.50% 0.20%
23:30 JPY Household Spending Y/Y Nov -1.30% 1.60% -0.60%
06:45 CHF Unemployment Rate Dec 2.40% 2.50% 2.50%
07:00 EUR Germany Industrial Production M/M Nov -0.20% 1.00% 2.80%
07:00 EUR Germany Trade Balance (EUR) Nov 10.9B 12.7B 12.5B
07:30 CHF Real Retail Sales Y/Y Nov 5.80% 0.80% 1.20%
07:45 EUR France Trade Balance (EUR) Nov -9.7B -7.2B -7.5B -7.7B
07:45 EUR France Consumer Spending M/M Nov 0.80% 0.50% -0.40% -0.60%
07:45 EUR France Industrial Output M/M Nov -0.40% 0.50% 0.90%
09:30 GBP Construction PMI Dec 54.3 53.9 55.5
10:00 EUR Eurozone CPI Y/Y Dec P 5.00% 4.70% 4.90%
10:00 EUR Eurozone CPI Core Y/Y Dec P 2.60% 2.30% 2.60%
10:00 EUR Eurozone Economic Sentiment Indicator Dec 115.3 116 117.5 117.6
10:00 EUR Eurozone Services Sentiment Dec 11.2 16.1 18.4 18.3
10:00 EUR Eurozone Industrial Confidence Dec 14.9 14 14.1 14.3
10:00 EUR Eurozone Consumer Confidence Dec F -8.3 -8.3 -8.3
10:00 EUR Eurozone Retail Sales M/M Nov 1.00% -0.50% 0.20%
13:30 USD Nonfarm Payrolls Dec 199K 400K 210K 249K
13:30 USD Unemployment Rate Dec 3.90% 4.10% 4.20%
13:30 USD Average Hourly Earnings M/M Dec 0.60% 0.40% 0.30%
13:30 CAD Net Change in Employment Dec 54.7K 24.5K 153.7K
13:30 CAD Unemployment Rate Dec 5.90% 6.00% 6.00%
15:00 CAD Ivey Purchasing Managers Index Dec 64.3 61.2