The more interesting jobs report today could be the one in Canada rather than the US. We’ve just seen a US rate hike, the Fed has stressed over and over again that further moves will be gradual, so it will take a very strong release for expectations to build for a move at the end of this month. In Canada, we’re seeing a contrary story playing out, with the unemployment rate having risen from 6.8% to 7.1% over the past few months, in part as the economy slows on the back of the falling oil price. This has already been felt on the currency so far this year, with USDCAD having pushed above the 140 level this week. The market is priced for around a 50% chance of a cut from the Bank of Canada by the April meeting, so this makes the release a lot more key for the currency than the US data for the dollar. Remember it was the Bank of Canada that came out with the first ‘surprise’ rate cut 12 months ago.
Although we’ve seen some stability in Asian stock markets overnight, it’s going to be an ugly first week of the year for equities. China has scrapped the circuit breakers that were brought in this week to reduce volatility and had the opposite effect. The Shanghai composite is currently little changed, with most other indices (Japan aside) trading in the green. We’ve also seen the mid-point on the USDCNY rate rise for the first time in 9 sessions, with some talk of the PBOC taking action to support the currency. We have inflation data at the weekend, so the focus will remain on China in the early part of next week. Oil prices have stabilised, which is providing some support for the commodity currencies, but overall we’re approaching the end of what has been a very volatile week which, if repeated through the year, will make it a very long one.