The focus on Friday was the all-important job numbers from the US, with the headline figure posting a slightly lower number than initially expected. The headline non-farm payrolls figure was 145,000 in December versus initial estimates of 165,000; another strong reading and in line with the ADP employment report on Wednesday which also confirmed a resilient sector. Traders were slightly concerned with the average earnings which only increased by 0.1% last month compared to expectations of 0.3%, as well as a downward revision of November’s numbers. The mixed data helped reinforce comments from the FOMC which suggested they will keep rates on hold throughout the majority of 2020.
The focus today will be on the expected signing of phase one trade deal between China and the US, whilst monitoring Fed speakers for clues on policy.
What is the Likelihood of a Bank of England Interest Rate Cut?
Closer to home the market has been focusing on comment from BoE officials following some dovish comments from Gov Carney. MPC member Tenreyo stated that risks were tilted to the downside and her bias was towards a rate cut if the economic downside risks emerge. Over the weekend, MPC member Vlieghe stated that he is ready to cut interest rates if data does not improve. Two members of the MPC, Saunders and Haskel, have already been voting for an immediate rate cut at the last two policy meetings. As a result, the market will now focus on economic data for clues on future policy action. Currently the interest rate expectation for a cut in January is 21% and for March above 30%.
Looking to the day ahead the market will focus on the UK’s monthly GDP and manufacturing production following the recent comments from BoE members. The monthly GDP is expected to be flat whilst manufacturing is expected to post a negative reading.