United States

The Dollar's Kryptonite in the Form of a Jobs Report

The US March employment report makes for dismal reading.  Job growth collapsed to 126k, the least monthly total since December 2013. Adding insult to injury, there was a 69k downward revision to this year's job growth. The average workweek slipped 0.1%, which may not sound like much suggests a significant drag on output. 

Low Oil Prices are Helping U.S. Consumers, but for How Long?

Lest we be too quick to forget whence we came, America is now 9-months into lower gasoline prices, which started their swoon the week of June 30, 2015 from a lofty national average just under $3.70, tumbling almost every subsequent week before bottoming and bouncing from $2.02 the end of January, according to gasbuddy.com.

U.S. Economic Strength and Bond Buying by the ECB and BOJ Should All Benefit the Dollar

Despite poor weather that appears to have effected other February data, the US jobs report is stronger than expected.  The economy grew 295k net new jobs, nearly all accounted for by the private sector (+288k). 

Some of the other details were not as impressive, but should be sufficient to boost confidence that the Federal Reserve drops the "patience" from its forward guidance later this month, keeping a June rate hike on the table.  

Is this a U.S. Economic 'Deflategate'?

US prices are falling.  The 0.7% decline in US consumer prices was the largest monthly drop since December 2008.  Consumer prices in January fell 0.1% from a year ago.  The last time the year-over-year CPI was negative was when the US economy was just beginning to recover from deep contraction associated with the end of the credit cycle and the financial crisis.  

Does this mean that US is experiencing deflation?  If so why is the Fed preparing the market for an eventual rate hike?  

U.S. Economic Suspicions are Proving Correct

The market is a fickle mistress.  At the end of September, and at the start of this month, we pushed against the hawkish read of the Fed’s dot-plots.  We resisted talk of a Fed hike in Q1 15.  We explained that the Fed’s policy signal emanates from the Troika of leaders, Yellen, Fischer and Dudley.  We warned that the US economy had lost some momentum at the end of Q3 and into Q4.  We had wrongly anticipated a softer employment report, but our larger economic suspicions are proving correct. 

Disappointing US Employment Data Evokes Muted Reactions in Market

The US employment data was disappointing. The short-term market had been leaning the wrong way. The recent data had fanned hopes that the labor market was accelerating, but today’s data suggest the pace of improvement has not changed.

 It is the sixth month that net new job creation was in excess of 200k, but private payrolls snapped that streak. The 198k increase in the private sector jobs was the lowest since January. 

Strong GDP Figures Extend Gains to Dollar and Stocks

The US dollar is extending its gains in response to the strong US GDP figures.  There are four elements of the report to note.  First, the economy expanded by 4.0% in Q2, well above consensus expectations.  Second, Q1 was revised to show a 2.1% contraction rather than 2.9%.  Third, personal consumption improved to 2.5% from a revised 1.2% pace in Q1 (originally 1.0%).  Fourth, and arguably even more significant that the growth itself is the core PCE deflator.  It rose to 2.0% from 1.2%.  

Nervous Calm Amid Forex Markets to Start the Week

The US dollar is little changed to start the week. The apparent calm masks heightened geopolitical tensions in Ukraine and Gaza. Equity markets are trading heavy and this is helping to give the core bond markets, including US Treasuries, a better bid tone.  

Investors are digesting the weekend developments and awaiting this week’s key data. US and Japanese CPI figures, euro zone flash PMI, and UK retail sales and first estimate of Q2 GDP are the main highlights.

Obama: Already A Lame-Duck President?

U.S. President Barack Obama first shot to global prominence in 2004 as a uniter, not a divider. But while most of the blame for Washington’s gross dysfunction will probably lie at the feet of the Republican right, that hates Obama with a rare passion, the Obama presidency may well soon be over – at least in terms of his ability to move the policy dial at home and abroad.