Non-Farm Payroll disappoints. Meanwhile, US Dollar chalks up another week in the green

Qluster analysts note that last week marks the sixth consecutive week in the green for US dollar bulls. 

Interestingly, it appears the market's reaction to US Federal Reserve Chairman Powell's testimony on Capitol Hill is responsible for the Greenback's move upside. 

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With an abrupt shift in posturing, the previously dovish Fed Chairman's inclination to drop inflation's 'transitory' designation signals a remarkable change for policy hawks. 

Consumer confidence data featured in focus early in the week, with an uplift in the cost of consumption and new COVID-19 variant cases leaning in on the latest figures. The CB Consumer Confidence Index fell from 11.6 to 109.5. 

Later in the weekly session, ADP Non-Farm Payrolls and ISM Manufacturing PMI data depict a more rosy picture - with a notable 534k increase in ADP NFP and ISM Manufacturing PMI rising from 60.8 to 61.1 in November. 

However, in the latter part of the week, the headline Non-Farm Payrolls and ISM Non-Manufacturing PMI numbers took centre-stage focus. 

While US NFP rose by a meagre 210k versus an expected 550k for November, official unemployment rates fell from 4.6% to 4.2% despite a rise in participation rates from 61.6% to 61.8%. 

Furthermore, service sector PMI numbers supported US dollar optimism, with ISM Non-Manufacturing PMI rising from 66.7 to 69.1 in the last month. Considering the distinct sense of direction outlined by the latest economic data, the Fed Chair testimony was instrumental in leading market consensus. 

Of particular note, the Fed Chair discussed the need to accelerate the tapering of bond purchases while referencing the need to remove the 'transitory' designation of inflation - fuelling speculation of an elevated chance of raising interest rates sooner than expected. 

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The Pound

November's finalised service sector and composite PMIs were the focus out of the UK. 

In this regard, services PMI reportedly rose from 54.6 to 58.5 - a slight disappointment from the preliminary value of 58.6. 

The weekly close saw the Pound down by 0.76% at US$1.3236, which is a further decline from the previous week's losses of 0.85% to US$1.3337. On the other hand, the FTSE100 saw a partial recovery of the prior week's 2.49% loss - concluding last week up by 1.11%. 

The Eurozone

Q moves to the Eurozone and observes a busier week in the economic data front. 

For November, EU and member state inflation and private sector PMI figures were essential to providing direction for the Euro. 

Risks of upside price pressures continue to mount as annualised inflation rates accelerate from 4.1% to 4.9% for the Eurozone in November. 

New restrictions announced in response to curb the spread of COVID-19 appear to mute the market's reaction to the mixed stats in French consumer spending and German unemployment. 

For the week ending December 3rd, the EUR fell 0.02% to US$1.1315 - walking back some of the 0.24% gain to US$1.1317 from the week prior. 

Although the DAX40 and EuroStoxx600 finished the week down by 0.57% and 0.28%, respectively, the CAC40 rebounded by 0.38%. 

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The Loonie

Canadian GDP and unemployment metrics were in focus, ahead of the BoC monetary policy decision slated for next week. 

As reported, GDP figures mark an impressive annualised growth rate of 5.4% and an expansion of 1.3% in Q3 - a positive change from a Q2 contraction of 0.8%. 

Furthermore, a decline in the unemployment rate from 6.7% to 6.0% supports an apparent upbeat in employment data, reporting a rise of 153.7k for the last month. 

However, the positive data was impotent in swaying market direction. The Loonie added to prior losses by declining a further 0.41% to C$1.2843. The previous week had seen downside action to C$1.2791 (-1.19%).

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The Yen

In October, Japanese retail sales figures made a comeback, with data posting an impressive 0.9% growth year on year. In September, retail sales had disappointed at -0.5%. 

In addition, preliminary industrial production also rose by 1.1% for the last month and marks a strong recovery from September losses of 5.4%. 

Finalised private sector PMIs also concluded in positive territory, after reporting a rise from 50.7 to 53.0 versus preliminary figures of 52.1. 

As a result, the Japanese Yen finished higher against the US Dollar at ¥112.800 - adding to a 0.54% gain in the previous week to ¥113.380.

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The Yuan

November's Chinese private sector PMIs feature in the limelight, as the preeminent Caixin Manufacturing PMI fell from 50.6 to 49.9 and the Caixin Services PMI reported a fall from 53.8 to 52.1. 

The Chinese Yuan rose by 0.26% to CNY6.3764 with no further data to establish market direction, paring back a 0.10% loss to CNY6.3933 from the prior week. 

Major Chinese indices concluded the last week of trading with a mixed result, with the CSI300 rising by 0.84% and the Hang Seng falling by 1.30%. 

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The Oceanic

Aussie dollar and Kiwi dollar bears enjoyed another week of downside action. 

It was a quiet week on the economic data front for Kiwi dollar news. 

Although declining business confidence for November featured early in the week, reporting a fall from -13.4 to -16.4, it seems the downside risks of economic recovery brought on by a resurgent COVID-19 was the ultimate catalyst for damage. 

Australian company gross operating profits and domestic private sector credit figures drew attention early in the week. While corporate profits rose an additional 4.0% in Q3 from the 7.1% jump in Q2, private sector credit reported an increase of only 0.5% in October - versus a 0.6% increase from September. 

GDP data for Q3 posted mid-week appear to comfort markets as economic contraction seems less severe than anticipated. Compared to the forecasted 2.7% contraction, the Australian economy contracted just 1.9% quarter on quarter. In the previous quarter, the economy had expanded by 0.7%. 

Despite a narrowing trade surplus from A$12.243bn to A$11.220bn, the scheduled trade data release attracted minimal attention and muted response from participants. 

As such, the AUD dropped by 1.71% to US$0.7001 while the NZD slid by 0.73% to end the week at US$0.6772. 

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Now, moving to the new week ahead...

Following on from the second-term reappointment of Jerome Powell to the office of US Federal Reserve Chairman, the question remains - will we now see a Powell acting more as a second-term central bank governor, as opposed to one aiming for reappointment to office? 

While the effects of a more hawkish Fed Chair Powell has yet to be seen, the markets turn to another big week of inflation data ahead for any clues that allude to a likely 'next move' in the policy front. 

Without digressing into media speculation, Qluster analysts note the comments of former Obama administration economist who appears to refute the White House's claims that Biden's infrastructure bill will alleviate inflationary pressures. 

Furthermore, refer to a recent fact-check publication by the Washington Post covers the comments of six out of seventeen Nobel laureate economists who wrote in support of Biden's bill. Remarks made by early proponents of the bill seem to cast doubt on the resolute toning of White House statements - that the USD 1.2 trillion infrastructure bill will effectively combat inflationary pressures in the medium to long term.  

President Biden @POTUS

My Build Back Better Act is a direct answer to the challenge of higher prices. But don’t take it from me: 17 Nobel Prize winners in economics have written a letter affirming that this bill would reduce inflationary pressures in the economy.

December 4th 2021

3,661 Retweets18,618 Likes

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See you for the next update.

- q

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