The European session today is basically empty on the data front. The focus is on the US NFP report as it will be a market-moving release, although next week’s US CPI should have more of an impact on interest rate expectations as the Fed is betting heavily on further progress in inflation to continue with cuts.
13:30 GMT/08:30 ET – Canadian Employment Report
Canada’s employment report is expected to show 25.0K new jobs in December versus 50.5K in November and the unemployment rate to rise further to 6.9% versus 6.8% previously. The latest report had a strong headline, but the details were quite negative.
CIBC cited a large increase in public sector jobs, the highest unemployment rate since 2016 and private sector employment growth of less than half of labor force growth. In fact, the increase in unemployment since the beginning of 2023 is mainly caused by increased difficulties in finding work. Layoffs didn’t play as big a role as they usually do in a recession.
To recall, the BoC cut the benchmark interest rate by 50 basis points as expected in the last decision, but dropped language indicating further rate cuts. This suggests that the central bank has peaked in its dovish stance, and will now slow the pace of data-driven cuts. The market expects at least two more 25 bps cuts this year with a 71% probability that one will come as early as this month.
13:30 GMT/08:30 ET – US December Non-Farm Payrolls
The US NFP report is expected to show 160,000 new jobs in December versus 227,000 in November and the unemployment rate to remain unchanged at 4.2%. Average hourly earnings Y/Y are expected at 4.0% vs. 4.0% previously, while the M/M measure is seen at 0.3% vs. 0.4% previously.
The Fed has forecast that the unemployment rate will average 4.3% this year. They are likely to tolerate overshoots of 10 or 20 basis points if inflation does not cooperate. However, the focus has returned to inflation, so the next CPI report will have more of an impact than the NFP report (barring large discrepancies in the data).
This article was written by Giuseppe Dellamotta at www.forexlive.com.
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