Read on the Trading Floor - 08 dec 2023
Today’s focus… US labour out in force, CB's to dominate the week ahead
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Macro Themes At Play
Theme 1 - What was that about the SAHM rule?
Theme 2 - CB's to dominate next week's calendar...
Further reading and listening of note
Theme 1 - What was that about the SAHM rule?
Strong labour data across the board, with UER dropping to 3.7% and killing the SAHM recession watch vibe that has been swirling around the market for the past 6-8 weeks. Hotter AHE will also be a warning that the fight against inflation has still not been won. Actors and UAW workers returning from the picket lines provided a strong foundation for the report. An incredible 69.4 Michigan Consumer Sentiment number (exp 62) came on the back of v.low inflation expectations (5y 2.8% from prev 3.2% whilst the yr ahead dropped to 3.1% from Nov's 4.5%).
As one would expect US fixed income didn't like it, with 10s closing the day 10bps wider at 4.25% and 2s back out to 4.75%. This has EURUSD closing sub 1.0750 and the DXY stronger especially against the commodity / high beta block (ZAR +1.2%, NZD -75bps, MXN +60bps and SEK +90bps). How will this data impact the Fed's communique next week and of course their dot plot / SEP forecasts? Will the market buy into Powell’s higher for longer mantra?
Macro Hive - Labour Market Defies Waller
Mish Talk - BLS Jobs Report Stronger than ADP, Fueled in Part by End of UAW Strike
Live Squawk - US Jobless Rate Falls As Strikers Return To Work
Economic Policy Institute - Jobs report shows a sustainably strong labour market—not a coming recession
- - The Sahm rule: step by step
Source Trading Economics