US And Canadian Employment Reports Ahead Of The Weekend

Japan's labor cash earnings rose for the first time in 12 months, but the 0.2% increase may reflect a change in the composition of the workforce--fewer part-time employees, perhaps due to discouragement. Base pay of full-time workers increased by 0.3% after a 0.1% increase year-over-year in February. Overtime pay fell by 6.2% year-over-year, after a 9.1% drop in February. Aggregate hours worked edged up by 0.4%, following the 4.5% drop previously. The important takeaway is the year-over-year readings are distorted by the base effect and that the small increase likely has little impact on inflation measures. Lastly, reports suggest the formal state of emergency in several large prefectures, including Toyko, is likely to be extended to the end of the month.  

The dollar traded in a JPY108.90-JPY109.70 range on Monday and has remained in that range for the rest of the week. The JPY108.85 area is a (38.2%) retracement of the leg up that began around JPY107.50 in late April. The pullback in US yields did not help the dollar's cause. The Australian dollar is pausing after approaching the $0.7800-hurdle yesterday. It has toyed with the level repeatedly over the last couple of months but has failed to close above it since early March. There is an option struck for a little more than A$1 bln that expires today. China was on holiday for the first three sessions of the week, and yesterday and today, the yuan firmed on the back of the softer greenback. The US dollar approached CNY6.4530 today, its lowest level since late February. The PBOC dollar fixing, which has become more transparent, was unexpectedly firm at CNY6.4678. This was a bit more than the normal variance from market expectations (Bloomberg survey of bank models) was for CNY6.4651. If the PBOC were to issue a mild protest of the yuan's strength/dollar weakness, this is one way it could do it. 


The tensions around Jersey, which saw both the UK and France sent naval forces to the area, have de-escalated. Although the conflict was never really likely, the show of force and bravado and rapid escalation illustrates that tensions over Brexit may be more intense than generally understood.  Earlier, the consequences of Brexit seemed to inflame the Northern Irish border. The Good Friday Agreement has been weakened by Northern Ireland remaining in the EU customs regime while the rest of Britain is out. The full results of the UK's local election are not known yet, but it does appear that the Tories have done well, including picking up a traditional Labour stronghold. In Scotland, the SNP is close to but may fall a seat shy of a majority. However, it can form a majority with the independent-minded Greens  It will likely continue to push for a referendum on independence, which the UK government will oppose. 

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Read more by Marc on his site Marc to Market.

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