Notes From Underground: Is Tomorrow’s Number a Meaningless Statement?

Yes, except if the nonfarm payroll numbers comes in above 300,000 jobs created and/or average hourly earnings rise above 0.4%, reversing last month’s -0.2 %. Consensus is for payrolls to grow by 235,000 but that is in line with the average of the last six months so it will have to be a strong number to give some substance to the more hawkish voices on the FOMC Board. More importantly for Chair Yellen will be the wage growth for if wages lag job growth the Fed will be reticent to raise rates, especially in the face of a strong dollar or the euphemism of” international developments.” In my humble opinion, global financial conditions in the light of European instability will play a larger role in the Fed’s decision to raise rates, which is why I maintain it will take a large number to give voice to those Fed voters wishing to raise rates.

At 7:30 a.m. CST the Canadian unemployment number will also be released and the market is looking for a GAIN of 5,000 jobs after last month’s jobs number of -5,000. The important part of the Canadian number will be the manufacturing jobs for with the recent depreciation of the LOONIE exports ought to be on the rise. The Canadian economy is heavily dependent on commodity production, especially energy, so any strength outside the jobs lost in fossil fuel production will be a positive. The market is heavily short the Canadian dollar so a stronger-than-expected number will put a bid into the Canadian currency. The unemployment rate is presently 6.6% and consensus is looking for a rise to 6.7%. It appears that the spot U.S./CAD should find support at 1.2320 to 1.2340 in the cash price or around 0.8100 in the futures.

Patience is advised because it is European news that seems to drive the market and causes all sorts of correlative trades. If oil continues to firm it will provide support for the Canadian dollar on a strong jobs number for strong OIL seems to signal a return to a risk-on profile.

***The Central Bank of Denmark (again) cut its overnight rate by 25 basis points to a -0.75%. Cutting the rate is a way to keep the pressure of speculators attempting to break the EUR/DDK PEG. The krone trade was very quiet today as the PEG held firm at 7.4456. Interesting point for the Danish Central Bank as 7.4493 krone to the EURO is the 200-day moving average. If the bank wants to get active cut the rate again (yes, more negative) and try to push the EUR/DDK cross above the 200-day moving average. In conjunction with the Danes successfully holding the PEG, the Swiss National Bank was able to keep the “soft eg” above 1.05, even in the face of negative headlines about Greece. The EUR/CHF closed toward its highs at 1.06 as it was rumored that the SNB was intervening and buying euros to support the cross. Will the SNB ever learn?

***In a Dow Jones article from Frankfurt, Germany, reporter Todd Buell wrote on comments from Bundesbank President Jens Weidmann. It seems Weidmann was in Venice, Italy and was undermining the recent efforts by Mark Carney to push for a European fiscal union. Weidmann said: “… in a genuine fiscal union, member states would renounce sovereignty on budgetary control to the European level. But, it now seems that populations and elected officials aren’t ready to make this step.” He noted that Greece was not cooperating with the Troika even as it was willing to accept its financial support. While the Weidmann comments may have seem to be directed as Greece, the real target of the German’s demands for surrendering fiscal sovereignty were meant for French. It has always been the French who have not wished to surrender its fiscal authority to Brussels for the French GDP is more than 50 percent government spending.

While the French wanted the EU it always wanted to remain French and not be subservient to the dictates of the austerity-minded Germans. As Weidmann made clear, “European leaders shouldn’t expand joint fiscal liability ‘before ceding budgetary sovereignty.'” As slavery was the open wound of the U.S. polity, fiscal sovereignty is the unresolved issue of creating a unified political entity. Weidmann let it be known that without fiscal harmonization the Germans are opposed to providing the EU with unlimited credit card. A European BOND can only be created when each state willingly surrenders it control of its state expenditures. No taxation without representation … I’ve heard that somewhere before.

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2 Responses to “Notes From Underground: Is Tomorrow’s Number a Meaningless Statement?”

  1. Chicken Says:

    Sure enough, long end bulls are being flattened. 🙂

  2. Yra Says:

    Chicken –funny indeed but yet the curve did flatten a touch—even with all the selling

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