Another day, another loss for the Greenback! What’s new? Not even stronger than expected economic reports were enough to keep the dollar afloat.
- U.S. Challenger job cuts down by 2.8% y/y in Jan, -3.6% previous
- U.S. preliminary non-farm productivity down by 0.1% in Q4 2017
- U.S. preliminary unit labor costs up by 2.0% vs. projected 0.9% gain
- U.S. initial jobless claims down from 231K to 230K vs. 231K forecast
- ISM manufacturing PMI dipped from 59.7 to 59.1 vs. 58.7 forecast
- U.S. construction spending up by 0.7% vs. 0.4% estimate
- U.S. total vehicle sales dipped from 17.9M to 17.2M as expected
- Canada’s Markit manufacturing PMI up from 54.7 to 55.9
- New Zealand building consents slipped by 9.6% in Dec
- New Zealand visitor arrivals down by 2.8% in Dec
Mostly upbeat U.S. data
Uncle Sam started the month on a positive note by releasing a slew of mostly stronger than expected economic figures. However, Wall Street seemed to shrug off these news and focused on sentiment instead.
First off, Challenger job cuts showed a 2.8% reduction in layoffs year-over-year for January. This was a slower pace of decline compared to the 3.6% drop in unemployment reported for the previous month but a good figure nonetheless. However, on a monthly basis, this translates to a 37.7% increase in planned job cuts.
Next up, the quarterly productivity and costs report from the BLS revealed that non-farm labor productivity dipped 0.1% in Q4 2017 versus the estimated 0.8% gain while the previous figure was revised from 3.0% to 2.7%. Now this is actually positive news since declining productivity for workers usually translates to higher wages, which would likely translate to stronger inflationary pressure down the line.
In fact, preliminary unit labor costs for the same quarter already came in way better than expected at a 2.0% gain versus the estimated 0.9% increase. However, the earlier figure was downgraded from 0.5% to -0.2%.
Lastly, the ISM manufacturing PMI also beat expectations at 59.1 for January versus the consensus at 58.7, but this was a lower read compared to the earlier 59.7 figure. It’s also worth noting that the labor component fell from 58.1 to 54.2 for the month, which suggests a potential downside NFP surprise. The index for prices, on the other hand, jumped from 68.3 to 72.7 to reflect rising inflation.
Yields up, equities mixed
It was one of those volatile days for the financial markets as equities tossed and turned on earnings reports while commodities were able to hold their ground.
- Dow 30 index closed up 37.32 points to 28,186.71 (+0.14%)
- S&P 500 index is down 1.83 points to 2,821.98 (-0.06%)
- Nasdaq is down 25.62 points to 7,385.86 (-0.35%)
Yields chalked up another strong day, with the 30-year yield surging to its highest level since May last year and breaching the 3% mark.
- U.S. 5-year bond yields were up 5bp to 2.5644%
- U.S. 10-year bond yields rose 7.5bp to 2.782%
- U.S. 30-year bond yields jumped 8bp to 3.016%
Major Market Mover(s):
The dollar didn’t exactly get up from the right side of the bed at the start of a brand-new month, leading traders to worry that it could spend the rest of February in the red.
USD/JPY hit resistance at 109.75 then slid back down to a low of 109.24, EUR/USD rose from 1.2430 to a high of 1.2523, GBP/USD continued to advance to the 1.4250 minor psychological mark, and USD/CHF tumbled to a low of .9256.
EUR & CHF
This European tandem held on to their gains and went for more during the New York session, with the latter taking its share of safe-haven gains from the dollar and yen.
CHF/JPY continued its ascent to a high of 118.05, AUD/CHF tumbled from .7459 to .7436, CAD/CHF slipped to the .7550 mark, EUR/JPY is closing in on 137.00, and EUR/AUD surged to a high of 1.5580.
Watch Out For:
- 12:30 am GMT: Australia PPI q/q (0.4% expected, 0.2% previous)