Financial Markets Embrace Risk as US Jobs Data Underwhelms

In a surprising twist, the latest US jobs data has injected optimism into financial markets, hinting at a potential pause in the Fed's rate hike cycle.

Key Factors for Today

• US Nonfarm Payrolls (NFP) fall short of expectations, hinting at a cooling jobs market.
• The Euro and Pound surge against a softer dollar following the US labour report.
• Oil prices see a reversal despite Middle East tensions easing.
• Mixed Canadian economic data observed, yet the Canadian dollar strengthens.

Market Movers

• EURUSD jumps over 1%, potentially eyeing the $1.08 mark.
• GBPUSD ascends 1.45%, shrugging off UK's service sector contraction.
• WTI crude oil prices drop by 2%, with a cautious eye on $80 a barrel.
• Canadian dollar gains despite mixed job data, with USDCAD dropping to 1.3650.

Economic Calendar

• Eurozone inflation rates and economic sentiment indicators are due.
• Germany's GDP growth rate and inflation rate to be watched.
• The UK's financial stability to be gauged with BOE consumer credit and mortgage approvals.
• The BOC Governor's speech is anticipated for insights into future monetary policy.

The Big News

Fed's Room to Manoeuvre

The US labour market has shown signs of cooling off, as the latest Non-Farm Payroll (NFP) report suggests. This slowdown could be a silver lining for the Federal Reserve, potentially allowing it to pause its aggressive rate-hiking policy. In the bond market, this shift in sentiment is evident, with the 10-year Treasury yield falling to 4.5%, a move that has been favourable for risk assets.

Euro and Pound Surge

In the currency arena, the Euro has made impressive gains against the dollar, breaching the $1.073 level, thanks to the dollar's weakening momentum post the jobs report. The British Pound has also rallied, climbing by 1.45% despite a contraction in the UK's service sector, eyeing the $1.2492 resistance level as its next target.

Oil Prices Waver

The oil market has been a theatre of volatility recently. West Texas Intermediate (WTI) crude experienced a quick reversal, erasing a 2% gain. This change reflects the easing tensions in the Middle East and anticipations of a less hawkish Federal Reserve. Despite this, the market remains on edge, with the impact of production cuts by major oil producers like Saudi Arabia and Russia until December 2023 seemingly already priced in.

Canadian Economy's Mixed Signals

Canada's employment landscape presents a complex picture. The economy added 17.5K jobs in October, but the growth was predominantly in part-time employment. The services sector has seen only modest growth, and the unemployment rate has inched up to 5.7%. Despite these mixed signals, the Canadian dollar has strengthened, with the USDCAD pair falling 1.60% from its recent high.