Intraday Market Thoughts

CAD Lower On Weak Jobs, US Jobs, ISM Services Next

by Patrik Urban
Feb 3, 2012 12:48

UK PMI services strong; Eurozone retail sales declined; employment in Canada lower than expected and unemployment rate rose; estimates for 2/29 LTRO. Key event for NY is NFP followed by ISM non manufacturing. There are 5 already CAD shorts in the latest Premium Intermarket Insights.

The USD is trading mixed in the ongoing session. It is weaker against EUR and GBP, unchanged against CHF and AUD and stronger against JPY and commodity dollars. Major European equities are higher by about 0.3%.

UK PMI services improved significantly in January to 56 from 54. This is the best result since 3/2011 and the rise in employment was the strongest in nearly four years. Improving PMI manufacturing and solid PMI services could imply that the expectations of an announcement of more QE next Thursday might be premature and that the MPC may instead choose the wait and see approach. GBPUSD is trading around 1.5840.

Eurozone retail sales declined in December -0.4% from -0.4% m/m (-1.6% from -1.5% y/y). This is the first December decline since 2008 as the end of the year is usually a busy time for retailers. Given the uncertainty and weak fundamentals (unemployment 10.4%) consumption is likely to stay subdued in the months ahead. EURUSD trades around 1.3175, below the key short term resistance at 1.32.

The number of employed Canadians rose in January by 2.3K significantly less than expected 23.3K and lower compared to December's 17.5K. Troubling is that full time employment actually decreased by 3.6K. Moreover, the unemployment rate picked up to 7.6% from previous 7.5%. The unemployment has been gradually increasing each month since 9/2011 and reached the highest level since 4/2011. USDCAD jumped on the news and trades firmly above parity.

In other news, MNI started to publish banks' estimates for 02/29 ECB's 3 year LTRO. The upper limit of the range is mostly EUR 300 to 400 bln. ECB deposits started to post marginal increases again with EUR 488.7 bln deposited on Thursday up from EUR 486.5 bln on Wednesday.

Eagerly awaited labor market data is due at 8:30 am ET. The NFP is expected to decline in January to 150K from December's 200K and the unemployment rate is seen steady at 8.5%. As a reminder, Wednesday's ADP came out below expectations and considerably lower at 170K from previous 292K. Hourly earnings should stay steady at 0.2% m/m but lower at 1.9% from 2.1% y/y.

ISM non-manufacturing is due at 10:00 am and it is anticipated higher in January at 53.2 from 52.6. December factory orders are due at the same time and expected lower at 1.5% from 1.8%.

SEE OUR 5 CAD SHORTS in latest PREMIUM CHARTS after the latest disappointing Canada jobs report. DIRECT ACCESS: sub01/access/?a=594 NONSUBSCRIBERS:


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