Wealthy Nations Daily Update - Non Farm Payrolls

Following on from the excitement over the ECB yesterday and disappointment from the limited rate cut, of 10 basis points, combined with the extension of QE for a further six months, the market was primed for today’s Non-Farm Payrolls (NFP) for November. The general feeling here is that the limited action by the ECB should assist the Fed with a rate rise at their December 16th meeting.

Additional easing by the ECB at this juncture, ahead of the Fed, would have seen the Euro fall further. Some calls were for parity against the US dollar by close of business yesterday, that was prior to the lacklustre announcement. This may have caused some further discussion/debate within the Fed as the dollar had already rallied over 12% this year to 1.056 before the ECB announcement.

The Euro traded today at 1.0861 ahead of the NFP so a stronger number now from NFP will not send the Euro into free fall. Rather it delays that move, smoothing any further decline until after Fed tightening; after which any additional ECB easing, which the European economy needs, can take place.

So today’s NFP announced at +211,000 (Est 200k) - with a drop in the unemployment rate to 5%, an additional 35,000 jobs in the two month net revision, a stable 0.2% for Average Hourly Earnings and a steady Average Work Week of 34.5 hours - leaves the door wide open for the Fed to lift off rates in two weeks’ time. Indeed with the EUR/USD rate currently at 1.0934 it would appear the central bank strategy has worked to stabilise the currencies for the near term.

Elsewhere, yesterday, Russia’s credit-rating outlook was raised to stable from negative by Moody’s Investors Service, who cited a stabilization of external finances and a diminished likelihood of the economy facing a further “intense shock” in the next 12 to 18 months after being sanctioned over Ukraine. Moody’s retain their Ba1 rating for the moment but another move towards upgrade.