The latest labour report on Friday confirmed the US jobs market cooled off, giving the Fed some room to hold also in December, suggesting peak interest rates. The 10-year fell nearly 50bps since its Monday high to 4.5%, letting most risk assets flourish.
Chart: GBPUSD
Nonfarm payrolls increased by 150K in October, lower than the 180K expected and last month’s now-downwardly revised print of 297K. The unemployment rate climbed to 3.9% from 3.8% due to the UAW strikes (Manufacturing jobs dropped 35K). Following Fed Chair Jerome Powell’s comments on further labour demand easing last Wednesday, the slowing in job gains along with decreased participation helped risk assets soar as demand for bonds rose. The stagnation in wage growth was seen as adding to the relief, with notable declines in Treasury yields boosting EURUSD over 1% to $1.073, leaving behind support at $1.067 and aiming for $1.08 next.
The S&P Global/CIPS PMI indicated that Britain’s services businesses remained in contraction in October as high-interest rates and cost of living pressures weighed on demand. However, the pound soared 1.45% against a weakening labour market in the US and is set for its biggest weekly gain in almost four months. $1.2492 is the next major resistance, with support settled by $1.2260. Meanwhile, BOE’s Chief Economist Huw Pill said that Britain’s high inflation is unlikely to fall quickly because demand slows down.
Oil prices resolved over 2% lower on Friday due to easing concerns in the Middle East and signs the Fed may be done hiking. TWTI reversed its Thursday gais fully, increasing the risk of downward continuations under $80 a barrel. Meanwhile, Saudi Arabia and Russia confirmed their production cuts through December 2023, aiming to keep prices from rising too high, with the combined cuts offering no aid Monday morning, suggesting the news has been priced in.
The Canadian economy added 17.5K jobs in October, but most of the gains were in part-time work. While some growth was seen mainly in construction, the services sector saw only modest expansion, with the unemployment rate rising slightly to 5.7%. The mixed jobs report showed some weakness but likely not enough to alter the BOC’s current policy stance of holding rates unchanged. Meanwhile, Canada’s Services PMI fell to a 14-month low of 46.6, tumbling below its September low of 47.8 and still in contraction.USDCAD added to losses on the back of declining yields in the US, now 1.60% lower from its peak at 1.39 at 1.3650. 1.36 could offer some support, being a round level, with resistance seen past the 1.37 resistance.