Despite a paucity of corporate earnings, there is no shortage of fodder for traders as we approach a key moment for Brexit, the final nonfarm payrolls release before the Fed’s December meeting and a good smattering of PMI releases to chew on.
Monday kicks off with British prime minister Theresa May in Brussels for lunch with European Commission president Jean-Claude Juncker. It is hoped that a pledge to offer more cash for the divorce bill will uncork talks on Britain’s future relationship with the EU.
Whilst the financial settlement appears to be resolved, it is unclear whether ‘sufficient progress’ has been made on the contentious topics of the Irish border and citizens’ rights.
GBPUSD rallied on news that the UK was prepared to up its offer, but the bulls have been kept on a fairly tight leash since as there are still numerous doubts about whether the European council will officially recommend moving onto the next phase of the negotiations at its meeting on December 14-15th.
Fridays sees the release of the final nonfarm payrolls and average earnings report ahead of the Federal Reserve’s policy meeting a week later. Whilst a rate hike is all but a certainty, the monthly NFP report will be as closely watched as ever.
Jobs growth missed the mark with 261k jobs added in October against expectations for more than 310k. This was the best month of jobs gains since July and the unemployment rate actually fell to 4.1%.
Nonfarm payrolls for employment for August was revised up from +169k to +208k, and the change for September was revised up from -33k to +18k , meaning employment was 90k higher than previously reported.
Of concern for the Fed is that wage growth has stalled and this raises doubts about the pace of inflation growth. Average hourly earnings rose 2.4% year on year, well down on the 2.9% reported last month and short of expectations for 2.7%. Again it’s a case of strong jobs growth but where is the wage growth? Without wages going up the Fed is going to struggle to achieve its inflation target.
The UK services sector, which accounts for about 80% of the British economy, is the main focus on Tuesday as traders look to see whether the economy is showing signs of stress.
The ISM non-manufacturing PMI is due later in the day and expected to confirm the US economy is on a solid trajectory following the upward revision to Q3 GDP growth last week. The world’s largest economy expanded at annual rate of 3.3% in the third quarter, up from a previous estimate of 3%.
Source: ETX Capital