Jobs drop no barrier to the Fed

As we wrote yesterday, today’s labor market report was always going to be a tough one to read. In September, the US economy shed over 30,000 jobs – the first negative print for nonfarm payrolls since 2010. While the headline suitably reflects the disastrous weather conditions in the south-eastern states, wages, unemployment and participation numbers all pointed in the right direction. With wage growth soaring to 2.9%, the unemployment rate dropping to 2001 lows and the participation rate seeing a healthy climb, it appears the longer-term health of the jobs market is still very much intact.

Questions have been raised over whether the surge in wage gains was down to lower paid workers being knocked out of the market by the weather (thereby artificially swelling the wage picture). Should this prove to be true, we’ll likely see this pattern reversed in the October release.

Following the release, the dollar’s jumped – pressing EUR/USD firmly below 1.17 and putting GBP/USD under further pressure. It’s believed that today’s numbers are messy, muddled and unclear, meaning it’d pointless for the Fed to alter their view on monetary policy on a single inaccurate and anomalous data point.

Sterling shaken as May’s leadership gets wobblier

Reports this morning of a rival Conservative MP tallying up party members to dethrone UK prime minister Theresa May gave markets a dose of uncertainty as investors feared yet another dreary leadership contest and further political instability. Only time will tell if the government’s insistence that the PM has the cabinet’s full backing is true, and we expect the weekend newspapers will have a field day in speculating who her replacement could be.

The pound currently trades weaker against both the dollar and the euro as a result.

More pain in Spain

According to the El Pais newspaper in Spain the pressure is starting to tell on the Catalan authorities ahead of the weekend with rumours of a leadership split and a ‘stall’ on the independence process. Prime Minister Mariano Rajoy is set to chair a cabinet meeting on Catalonia today with businesses in the region also starting to express their dissatisfaction with the situation.

At the margin a snap independence decision over the weekend does seem a little less likely this morning but we reiterate our guidance from yesterday that we would not be surprised if investors sold the euro heading into the weekend in preparation of a painful opening on Sunday evening.

Have a great day and a better weekend.