The February jobs data has been compiled and is now ready for public consumption. The consensus is for 165,000 (revised upward from 160,000) nonfarm payroll jobs being added and the rate to hold steady at 7.9%. This may be a difficult number to trade because the equity markets have already sloughed off so much negative news to keep the rally in tact–Italian elections, sequestration and economic malaise throughout Europe. The weekly jobless claims numbers have surprised on the downside during the last few weeks so a 200,000 NFP number would not be a surprise. It will be more important to watch average hourly earnings and the length of the work week–earnings are expected to be up by 0.2% per hour.
Posts Tagged ‘Pound’
Notes From Underground: Friday Is the All-Important U.S. Employment Data, But Why Was European Employment Glossed Over?March 7, 2013
Today, French President Francois Hollande called for a managed currency rate for the EURO. It seems that the French are now concerned that the euro is too strong for its fragile economy. The problem is that as long as ECB President Mario Draghi is happy with a stronger euro the French are in a difficult situation. I have argued that a “strong” euro placates the German hard money crowd. All of the ECB‘s monetary policies have stabilized the break-up risk of the EU while not subverting the currency’s value. Mario Draghi can tell the Germans that his policies are being supported by the market and thus keep Bundesbank President Weidmann at bay. While the BOJ, BOE and the FED have had to actively enact QUANTITATIVE EASING, the ECB has actually seen its intervention contract as money has been paid back and collateral returned. (See last week’s repayment of the LTRO funds.) While the YEN, POUND and DOLLAR have been sold by the market, the EURO has attained star status.
In a relatively quiet trading day, the GOLD market rallied $25 after spending most of the PIT TRADING DAY attempting to break and set up a correction to the recent rally. Shorts ran for cover. WHY? Two stories that gave the rally a rationale:
2. A STORY IN THE NEW YORK TIMES “GROWING AIR OF CONCERN IN GREECE OVER NEW BAILOUT,” by RACHEL DONADIO.
Global equity markets were battered for another day as investor fears continued to outweigh any desire to add risk to portfolios. All U.S. data releases were better than expected and even auto sales proved to be a million more units above consensus on an annualized basis. The equity markets did try to rally but the attempt was short-lived and by market’s end the selloff was greater than 2.5%. Commodities were soft and the DOLLAR continued to rally on its haven status. The BOND market saw the impact of the “TWIST” as it is now October and the SOMA (SYSTEM OPEN MARKET ACCOUNT) began its work on affecting TREASURY DURATION.
The unemployment report on Friday was much weaker than expected as zero net jobs were created. More disheartening was that average hourly earnings produced a negative number, which failed to confirm and support the earlier released personal consumption data. The equity markets went into risk-off mode as the economy went into the Labor Day weekend in a very fragile state.
(and I Thought Madoff Was In Jail)
It seems that Vice President Biden used some of his miles to head to China for his summer vacation. The Chinese have been vocal critics of the U.S. and its profligate ways. As the largest foreign holder of U.S. Treasury debt, the Chinese have more than a passing concern in the outcome of U.S. economic and fiscal policy. The Chinese are not the single largest holder of U.S. debt as that award goes to the FEDERAL RESERVE. The Obama administration sent BIDEN to reassure the Chinese that the U.S. still maintains a FICO score more than 720.
The markets were all waiting for a major statement regarding the European political situation and its effect on the financial system. It wound up being the most banal as it makes me wonder what leaders of the two dominant nations in the EU held back from the media and markets. The main point was the announcement about a financial transaction tax, but to say there were no specifics about the tax given would be hyperbole. The markets were expecting some statement about an increase of funds for the EFSF, but again, nothing. The EURO was initially sold but by day’s end the damage to the currency was less than minimal.
Yes, the ECB raised rates today and Trichet failed to listen to the wisdom offered by NOTES FROM UNDERGROUND. That means I have overestimated the wisdom of Trichet while underestimating the size of his ego. The rate rise to 1.5% was widely anticipated so the EURO was immediately sold but regained some strength after the ECB announced that it was WAVING THE MINIMUM CREDIT RATING FOR PORTUGUESE BONDS USED AS COLLATERAL FOR REPOS. As the ECB raises rates, it allows for weak collateral to be utilized thus allowing for a large liquidity infusion. This is a fine example of Dostoyevsky’s Grand Inquisitor as bread is taken from the people with one hand and returned to them with the other and the people believe it is a miracle. Europe has become a “ball of confusion.” Why raise rates when you are simultaneously lowering credit standards to prevent a sovereign default?
The market’s attention turns to the ECB and BOE rate decisions. Any rate change would be a surprise as the U.K.‘s data has been weak of late as the austerity budget is beginning to be a drag on the British economy. The policy makers in England are content to let rates stay on hold as it helps to weaken the POUND against the EURO. It will be more interesting to hear from the ECB through Trichet to see if the Europeans are content with the present inflation situation, especially as the EURO has made new highs for the last 18 months. The recent strength of the EURO is a problem for the debt-stressed countries and with the U.S. on hold for an “extended period” any move by the ECB would put more upward pressure on the EURO currency. Let’s see if Trichet surprises us by discussing the recent strength of the EURO. The post-meeting press conference will be waiting to hear if Trichet loses the vigilant language.