Intraday Market Thoughts

Robust Canadian Employment Data; Focus Turns to NFP

by Patrik Urban
Oct 7, 2011 12:20

UK Input and Output PPI rose; German industrial production fell; Canadian labor market data robust. Market turns to NFP. Ashraf's Pre-NFP Premium Trades will be released at approx 7:45 EST (11:45 GMT, 12:45 BST)

Yesterday's risk rally fueled by ECB announcement of multiple fixed rate, full allotment liquidity facilities and new round of QE by BOE continued throughout Asia but started to stall during the London session. USD is generally little changed since London open.

GBP continues to be the relative strength winner despite the new round of QE and Moody's cut of 12 UK financial institutions. Various inflation measures confirm persisting price pressure: UK PPI input prices rose 1.7% in September from -1.8% a month earlier which translates to a 17.5% increase from 16.2% on annual basis. Monthly Producer output prices increased 3.8% and annual prices soared 6.3% which is the highest since 10/2008. BOE has been expecting that inflation will start to decline but prices relentlessly continue on their upward trajectory.

German industrial production fell -1.0% in August after a solid 3.9% increase in July. Even though the print was above expectations of -1.5%, going forward industrial production is expected to decline further as a consequence of fewer orders.

Canadian Net Change in employment in September printed robust 60.9K from previous -5.5K and better than expected 15.2K. The unemployment rate declined to 7.1% from 7.3%. Unless the NFP disappoints and equity markets sell off, solid data combined with substantial oil gains should keep the loonie underpinned.

The eagerly anticipated September NPF figure is due at 8:30 am ET and is seen at 55K from previous unchanged reading. The unemployment rate is expected unchanged at 9.1%.

Wednesday's ADP report showed not only better than expected result (91K vs. 76K exp.) but also a slight improvement compared to August (89K) so the possibility of a significant disappointment is lower to a certain degree. Nevertheless, even a print that is in line with expectations will not change the bleak outlook for the US economy.

Average Hourly earnings are seen slightly higher at 0.2% in September compared to -0.1% in August. The last data release will come at 10:00 am ET. August wholesale inventories are seen lower at 0.6% from previous 0.8%


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