Strong US Jobs Data and Central Banks

Daily Analysis - 05/02/2018

GBP vs USD

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The GBP ended lower against the USD. UK markets ended in the red during the week, following a slump in housebuilding sector stocks. Additionally, UK’s manufacturing PMI declined to its lowest level in seven months in January and the nation’s construction PMI fell more than expected in the same month. On the positive side, UK’s consumer confidence surprisingly rose in January.

The bears could be eliminated on the US Dollar 


The week to February 2nd was marked by the strong US jobs data released last Friday. Global equity markets ended lower last week, amid expectations that higher US inflation will prompt Federal Reserve (Fed) to raise interest rates at a quicker than anticipated pace. Dow Jones lost more than 660 points on Friday, the biggest plunge since June 2016, while the S&P 500 lost 3.9% in week, the most since early 2016.

The Euro-zone’s gross domestic product (GDP) for the Q4 and the consumer price index (CPI) for January were in line with market estimates. The final manufacturing PMI dropped slightly in January from December. The EUR ended higher against the USD, amid growing investors’ optimism over the Eurozone’s economy and after the region’s unemployment rate came in as expected in December.

US markets ended the week in negative territory, as investors’ sentiment was dampened amid concerns over surging inflation and bond yields. The USD ended higher against most its peers, following upbeat jobs report for January. The policy statement of the US Federal Reserve (Fed) stated that inflation would advance this year and pointed towards gradual interest rate hikes in future. In economic news, private payrolls in the US grew more than expected in January and the nation’s manufacturing sector surprisingly expanded in January. The unemployment rate in the US remained unchanged in January and non-farm payrolls advanced more than market expectation in January.

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Central banks pave the way for the future of Global Growth


Global financial Markets have 3 major monetary policy makers’ meetings. As the Global economy is growing the most since the US Great Recession and the European Debt crisis, policymakers are expected to raise interest rates from all-time lows.

Staying on the central bank front, traders will pay close attention to monetary policy decisions from Reserve Bank of Australia Policy Meeting is due on Tuesday at 03:30 GMT, Reserve Bank of New Zealand Rate Review due at 20:00 GMT on Wednesday and Bank of England policy meeting on Thursday.

Global financial markets will focus on this week's Super Thursday, Bank of England policy meeting, for further details on when the central bank plans to raise rates again. The BoE's Monetary Policy Committee looks almost certain to keep rates at 0.50% as it heads for Brexit, but investors are increasingly expecting another move to come along soon since inflation is within target and economic data releases are positive. Politics are always in focus, as market participants keep an ear out for any news regarding the ongoing Brexit negotiations.

Canada is going to release January employment figures at 13:30 GMT on Friday. In addition to the jobs report, Canada will publish the monthly trade figures, building permits and the manufacturing survey. The importance of the Jobs report comes after Bank of Canada raised interest rates last month, but said that some monetary policy accommodation will likely be needed to maintain optimal growth and inflation.

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