The US dollar is trading within yesterday’s ranges against the major currencies. The Canadian dollar is the main exception. It is pushing lower still, with the greenback pushing a little beyond CAD1.1550. The main development today is the continued drop in oil prices.
Today we learn of the participation of the second opportunity to borrow funds from the ECB under the Targeted Long-Term Repo facility. Recall that this year’s access was limited to 7% of a bank’s loan book (loans to households and businesses excluding mortgages). Next year’s access is somewhat linked to growth of that loan book.
The markets have been subject to large moves in recent days. Some, including the dollar, were counter-trend moves. Some, like oil, were accelerations of the existing trends. There have been a number of surprise developments today, including the less dovish Reserve Bank of New Zealand and the 25 bp cut from Norway’s central bank. The markets are trying to stabilize, and the dollar’s correction appears to have exhausted itself.
Global investors panicked Tuesday after Greek stocks fell over 10% and China signaled a tightening of its credit market amidst fears of growing defaults and oversized risk in local bonds.
While Brazil, Greece, and China saw a bearish market on greater concerns about emerging market growth, U.S. stocks reversed from an early morning decline as greater confidence in American stability overtook concerns about a global slowdown.
As the official election campaign rolled out last week, the media are still trying to get a handle on what the upcoming Japanese election is all about. This is ‘the election Japan didn’t need to have’ or the election ‘that’s not about anything in particular’, except securing Prime Minister Abe’s and the Liberal Democratic Party (LDP) survival in the longer term.
The incumbent Liberal Democratic Party (LDP) seems to be cruising towards a victory in the snap election to be held on 14 December. But beware of interpreting this as a ringing endorsement of Prime Minister Shinzo Abe. Instead, the likely result shows just how weak Japanese politics has become.
Prime Minister Abe’s decision to call the election two years ahead of schedule appears odd, especially given that the LDP–New Komeito coalition currently holds a two-thirds majority in the lower house.
The United States added 321,000 jobs in November as job growth continued to accelerate, marking 2014 as the best year for jobs since 1999.
The United States added over 2.5 million jobs in 2014, while a number of secondary indicators point to improvements in the American labor market. The unemployment rate has fallen steadily in 2014, reaching 5.8% in November, unchanged from the prior month.
Labor force participation, while historically at low rates, has begun to stabilize. It remained at 62.8% in November, the lowest rate since the 1970s.
The fifth round of the China–Japan–South Korea Free Trade Agreement (CJK FTA) negotiations concluded in Beijing on 5 September. The three countries hope the negotiations will finish in 2015, but this partly depends on the progress of the Trans-Pacific Partnership (TPP) negotiations.
If there was one report to count on to shake up markets, it was the monthly US jobs report. Part of the issue was that of all the economic data that the US reports, economists had the greatest difficulty in forecasting the monthly change in non-farm payrolls. It is simply the residual of a great churn—many job gains and losses–and there are not many reliable inputs. Another source of volatility was what the labor market news meant for policy.
The strength of the US employment report is seeing the dollar jump across the board. The divergent theme is out in relief. The 321k rise in non-farm payrolls is the strongest print of the year and is the second monthly increase above 300k since early 2012 (the other one being this past April). On top of that, the back months’ figures were revised up by 44k.
