Keeping in mind that some major financial institutions scared the market with forecasts reaching -100k, citing unfavorable weather conditions, a final reading of “just” -36k was received as a real breakthrough on the US labor market, even though (in our view) it is not. Anyhow you slice this report it still looks bleak when compared to corresponding reports from smaller economies: Australia and Canada. In January employment grew by 53k in Australia and 43k in Canada even though their labor markets are 13 and 8 times smaller! Make it comparable and you get a massive increase of 650 and 350k! Can you imagine market’s reaction to that?    

Australia and Canada continue to give signs of faster growth. Both countries record stable improvement in employment and accelerating GDP growth. A solid macroeconomic picture kept their currencies relatively stable against the US dollar while the euro sunk dramatically. Now as the sentiment towards the European currencies remains weak, AUD and CAD may be winners. The USDCAD is actually close to an important support of 1,02 and decisions will need to be made here soon. The AUDUSD was revitalized by a recent hike in rates and may eye crucial levels of 0,9330 and 0,94. The data may play a key role in those decisions. Payrolls reports are due on Thursday (Australia) and Friday (Canada). On top of that investors will await housing starts (today), trade balance and cap utilization (Thursday) in Canada and mortgage lending and Westpac sentiment (Wednesday) in Australia.

The impact of those figures on the global markets will be limited, of course. Here the central stage is reserved for the package of Chinese figures on Thursday (including output, retail sales and inflation) and US retail sales (Friday) and initial claims (Thursday). The US figures are important because claims will (in a way) verify the situation on the labor market once again, while the retail sales report is about to illustrate how dangerous a drop in confidence (shown by a recent Conf Board) really is.

Przemysław Kwiecień Chief Economist

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