– As does UK services PMI
– A quiet day in prospect
Good morning. The Ivory Coast has been first to put in a bid for the 2026 football world cup. Its two presidents say the country is a perfect location and have invited each of FIFA’s executive committee members to Monaco to see for themselves just how perfect it is. Insiders at several Swiss banks have already booked flights to Djibouti to make the necessary arrangements.
Meanwhile, outsiders in several economic research departments have been on the hat diet since Friday, when they were confounded by the UK services sector purchasing managers’ index (PMI) and the US employment report. After a much stronger than expected manufacturing PMI earlier in the week there was perhaps good reason to think the services reading would be similarly robust. It was not. It went down from 53.2 to 53.0, not at all the required outcome for sterling. To add insult to injury, everyone else’s services PMI went up; the euro zone’s by two points to 55.4. Intriguingly, the pound suffered hardly at all from the news, just as it gained no real benefit from Wednesday’s 16-year high for the manufacturing PMI.
The US employment report marked another failure for the forecasters. After a 151k monthly rise in non-farm payrolls in October, later revised to 172k, analysts had been looking for an increase of slightly less than that in November. It was therefore a major disappointment to the dollar when the figure came out at just 39k. Yes, it was a positive number, but the US economy lost 8.4 million jobs between the end of 2008 and the end of 2009. This year it has replaced a million of them. Investors looking at the pace of jobs growth wonder, quite reasonably, if it will take another seven years to return to pre-crisis employment levels. It cost the US dollar a cent against the euro and more than one yen.
Tragically, the news hit the Canadian dollar even harder than the Greenback, despite the announcement of a perfectly decent 15.2k increase in Canadian payrolls an hour and a half earlier. Just as the Loonie can benefit from positive economic news south of the border, so it can suffer when the going gets tough in the States.
For sterling the game had more to do with the ups and downs of the euro than with the UK economy. The pound would probably be opening today unchanged from Friday morning had it not been for the US non-farm payrolls figure. As it is, sterling is about half a cent down against the euro and a cent and a half lower against the ebullient Swiss franc. It is slightly softer against the antipodean dollars and a cent and a half stronger against the unfortunate Canadian dollar.
After Friday’s statistical bonanza today will be very dull. The Sentix index of Euroland consumer confidence, the Canadian all-sector PMI and Canadian building permits are as good as it gets. Overnight the Reserve Bank of Australia is expected to hold its policy interest rate steady at 4.75% and the Halifax might release its house price index for December (its timing is always something of a surprise). It could be a tedious day; make the most of the beautiful weather.