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USD gains a little after solid US employment numbers

Good morning

Stronger than expected US nonfarm payroll numbers Friday saw a headline of +467k, expected 165k, with revisions higher to previous months as well, average hourly earnings also up. The unemployment rate rose 0.1% to 4% but overall these were a solid set of data. US dollar did push a little higher but nothing too significant and most majors are really within 20-30 pips of pre-announcement levels. US stocks did well to end the day on a mostly positive note although futures prices this morning currently suggest a weak opening.

At the same time we did see Canadian employment numbers, they were weaker than anticipated which sent USDCAD from low to high 1.27s, but the pair has since settled back around the 1.2730 area.

ECBs Knot has said he expects to see a rate rise as early as Q4 2022 which could be followed by another in Q1 2023. This supports the market interpretation of Lagardes comments last week and keeps EUR supported. It was only in December that Knot has said he couldn’t rule out a rate rise in 2023 which at the time was a little hawkish, so this latest comment really shows quite a dramatic turn. EURUSD 1.1440 as I type, had seen a high around 1.1480 on Friday. Lagarde speaks later today, I wonder if she will try to come across a bit dovish but after the ECB meeting and Knot’s comments this will be rather difficult.

UK PM Johnson has had a few letters of no confidence so far, the exact number isn’t clear but we still aren’t at the 54 needed to force a vote. Johnson is sticking to his post, no intention of resigning and I’d expect to see further changes around his closest circle as he tries to make good on his ‘we will fix it’ claims. Everyone else’s fault but his. But the Conservatives are still probably better off with him staying in the role for the time being. GBPUSD at 1.3545, EURGBP 0.8445 (GBPEUR 1.1840).

Russia/Ukraine still very much in the headlines, with US warning that an attack could take place at any time. Macron though has said it is reasonable for Russia to raise its own security concerns, and said a deal to avoid a war was possible. Is he happy to accept Russia’s demands?

China markets have reopened after their holidays, with Shanghai Comp up just over 2% which brings them more back into line with gains made in other regions.

I haven’t forgotten to complete the calendar for todays report, there just isn’t anything exciting to show other than Lagarde speaking. In fact the week is pretty quiet data-wise until Thursday, when we have the all-important US inflation data.

So onto weekend news. The FA cup saw a couple of shock results with Nottingham Forest beating Leicester and National League side Boreham Wood beating Bournemouth. Unfortunately I am sorry to say that my U15s couldn’t create a shock of their own in the County Cup and bowed out gracefully to a much stronger team. Disappointing but still a major achievement to reach the quarter finals. We are still in two cup competitions but as we progress we know we will face strong and stronger opposition, we are enjoying it while it lasts but realistically our chances in both are limited. The league, now that’s a different matter, assuming we can get all remaining sixteen matches played.

- 15.45 ECBs Lagarde speaks

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