Last Friday’s U.S. December employment increased less than expected (+156k vs. +176k), but the markets interpretation in a rebound in wages (+0.4% m/m) suggests a sustained labor market momentum that sets up the domestic economy for stronger growth and further interest rate increases from the Fed in 2017.
A government mandate forces Italian pollsters to stop their work two weeks preceding the Italian vote on constitutional reforms, reducing the anxiety about the No result. Italians headed to the polls on Sunday, December 4 and while the referendum is not about a potential Italexit (Italeave?) it could mark the beginning of the end for Italy’ membership in the European Union.
The main story this week in the markets was the flash crash of British pound on Friday. The currency lost 6 percent in under two minutes at the start of the Asian trading session. There are multiple theories on what sparked the move with algorithmic trading and human error among others. The GBP touched 31 year lows and although it recovered some ground it will close the week under the 1.25 price level.
The BoJ and the Fed kept rates awaiting further economic data. The USD is mixed against major currencies after a week filled with central banks statements but little action. The Bank of Japan (BOJ) and the U.S. Federal Reserve published their respective rate statements less than 24 hours between them. The status quo was maintained with very little in way of changes to monetary policy.
Fed members supported a possible rate hike even as US data softens
The September Federal Open Market Committee (FOMC) rate hike got a couple of endorsements today from the U.S. Federal Reserve. Both FOMC voting members talked up the chances of a rate hike this year, which could come as soon as September.
Today is D-day for the European Central Bank (ECB).
Market consensus does not expect euro policy makers to deliver a new round of stimulus this morning. Nevertheless, officials are expected to release a new raft of economic forecasts, which should help provide the market with further clues on how much stimulus the ECB is likely to deliver in the future.