The U.S. Dollar is up this morning, strengthening as a result of a good Employment Situation.
Overview
October Non-Farm Payrolls improved by 531K over the 450K expected, but more importantly, the original low reading for September was revised from 194K to 312K jobs added. The Unemployment Rate went down from 4.7% to 4.6%, the change in Manufacturing was double the expectation, and Average Hourly Earnings grew as estimated. This week does indeed close with the buck on the positive, reaching its best overall level since mid-October.The lack of central bank determination to tighten, with Canada being the enthusiastic exception, has played into the hands of dollar-bulls, who initially saw losses post-Fed, but the larger message of being cautious instead of ultra-confident is affecting other global assets more. Unfortunately, the timing for lowering central bank expectations of eradicating loose measures is good since COVID-19 news out of China and continental Europe paint a worrisome picture that might require the environment to remain accommodative, and flexible.
Tough times in supply chains and rising COVID concerns make it difficult for central bankers to increase borrowing costs as the economic recovery remains at high risk of derailing.
What to Watch Today…
- No major economic events scheduled for today
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EUR
The Euro continues its slide as economic indicators prove that the European Central Bank can take its time before taking away too much stimulus from its emergency bond-buying program. Purchasing Managers Indices out of Spain and France contracted instead of expanding, Factory Orders out of Germany fell short of expectations, and Euro-zone aggregate Retail Sales also contracted when the forecast was of a gain.
The lack of significant advancement, and in fact, the regression in these numbers is a sign of a still troubled region that could use caution as well as a serious fiscal boost. The shared currency is now at its weakest level since July 2020.
GBP
The Pound is not awfully far from trading at its weakest level of the year after a surprisingly dovish Bank of England policy announcement yesterday. Although we had warned in previous monthly outlooks about how long-Pound bets were starting to go down for the first time since last year, the 1.5% percent slide seen yesterday came because of the shock perceived in Governor Andrew Bailey’s statements.
It seems as if inflationary fears have turned into economic downturn ones as Delta proved to crush Q3 for industrialized regions that hoped for better by this time of the year. There is little enthusiasm for increasing interest rates at a time when uncertainty remains and clarity is scarce.
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