Trading Year Starts, US Non-Farm Payrolls Ahead

January 03, 2023 10:45

The start of the trading year brings key trading news, including US Non-Farm Payrolls (NFP) and global productivity updates.

Last year, resilience in the job market went a long way towards sheltering the US economy from fierce interest rates and inflation headwinds. Going forward, will global recession fears overshadow optimism towards growth in the labour market?

The NFP report for December is due out on Friday with more insights into the situation. It’s seen at the level of 200K compared to November’s result of 263K, already indicating lower expectations. If the report is better than the consensus opinion, it could support the USD. In the scenario that the NFP is in line with expectations or worse than expected, it could trigger volatility in the USD currency pairs and gold-linked assets.

USD strength was a main story last year and market movements centered on the NFP report issued on the first Friday of the month. Whether the US Dollar will remain relatively strong in the short term largely depends on the Federal Reserve’s upcoming interest rate decision and job market growth, amongst other factors like China’s growth.

Uncertainty over China’s contribution to global growth deepened after the Caixin Manufacturing PMI weakened to 49 in December compared with 49.4 in November. China’s productivity data could have a magnified effect on sentiment given the expectations of a worldwide slowdown. Weaknesses could impact on stocks of multi-national companies with production centers in China, and the Yuan currency crosses.

EU productivity

Like many other economies, the EU’s productivity is intertwined with China’s. The S&P Global Manufacturing Purchasing Managers Index (PMI) for Europe remained in negative territory in December, according to the latest figures. The PMI was reported at the level of 47.8 in the last month of the year, compared to November's level of 47.1, in line with expectations. Anything below the level of 50 indicates a contraction.

UK productivity

The final S&P Global/CIPS Manufacturing PMI for the United Kingdom will be released later today. Previously at the level of 46.5, the consensus for December is seen at 44.7. The main pressures in the UK economy are high inflation and rising interest rates dampening investment and sales. If these pressures have weighed on manufacturing more than expected, there could be a reaction in the GBP currency crosses.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Sarah Fenwick
Sarah Fenwick Financial Writer, Admirals London

Sarah Fenwick's background is in journalism and mass communications. She has worked as a correspondent covering Swiss Stock Exchange news and written about finance and economics for 15 years.