Silver chart – Source: FX Empire
US Jobs Market Continues to Cool
Despite the November US jobs report showing the economy added 64,000 positions (above the 50,000 median estimate), October’s revised 105,000 decline was also in focus, driven by sizeable government payroll cuts. The unemployment rate also ticked higher to 4.6%, above both the 4.4% median estimate and the Fed’s latest SEP projection for this year (4.5%).
Per Fed rate pricing, investors deemed this report insufficient to prompt near-term easing, with -6 bps of cuts implied for January’s meeting, and March currently sitting at around a 50/50 call (-13 bps).
Tomorrow, the US November CPI inflation data will be released. While I do not expect this to command as much attention as yesterday’s employment report, given the limited October data, it is still worth watching. However, markets may react erratically to the initial release, though moves could fade as the picture becomes clearer, with December’s CPI report likely proving more pivotal for Fed policy direction.
BoE’s Bailey Likely to Side With the Doves
The BoE rate decision is due at midday on Thursday, and markets widely expect a 25 bp rate cut, bringing the bank rate to 3.75% from 4.00%. Although a cut is certainly on the table, the last meeting’s 5-4 vote to hold at 4.00% and the deeply divided MPC mean that everything will likely rest with BoE Governor Andrew Bailey. So, another tight split appears likely – possibly a 5-4 in favour of a cut.
At the beginning of the week, I noted that I thought the markets were a little ahead of themselves on rate pricing (92% in favour of a cut). However, yesterday’s UK October jobs data and the November CPI inflation print released earlier this morning have likely sealed the deal to push Bailey to side with doves tomorrow.