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
Theme 2 - CB's to dominate next week's calendar...
ECB, SNB, BoE, Fed and Norges are all in play, some more so than others with Lagarde squeezed by the 5/6 cuts priced into the Euro curve whilst JPow has his work cut out to get the mkt to believe there will not be significant cuts next year from the US (maybe the data will do it for him....)
ECB - Will Lagarde accept the markets first cut by March
Pepperstone - Playbook For The December ECB Decision
ING - December’s ECB cheat sheet: A reality check for ultra-dovish expectations
Fed - How will the SEP be used to re-enforce Higher for Longer?
Apollo - The Market Is Underestimating the Fed’s Commitment to 2% Inflation
ING - We expect another Fed hold, but with pushback on rate cut prospects
- - THE REASONS WHY THE FED BLINKED
Nordea - Does the US need rate cuts in March?
Week Ahead Previews -
Nomura - Final FOMC Meeting of The Year, ECB and BOE Meetings, and the Japan Tankan Report
Newsquawk - Week Ahead highlights include: FOMC, ECB, BoE, SNB; US CPI, China activity data
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