Market Drivers Dec 10, 2015

Aussie jobs blow past all expectations
UK Trade Deficit expands
Nikkei -1.32% Eurostoxx -0.03%
Oil $37/bbl
Gold $1073/oz

Europe and Asia:
AUD Jobs 71.4K vs. -10.0K
CHF SNB stays on hold
GBP UK Trade Deficit -11.8B vs. -9.8B

North America:
GBP BOE Meeting 07:00
USD Weekly jobless claims

The Australian jobs report produced blockbuster numbers sending Aussie higher by more than 100 points in Asian session trade, but many analysts doubted the veracity of the figures while grudgingly acknowledging that as a result of the data, the RBA will remain stationary for a considerable period of time.

Australia produced 71K new jobs in November versus a forecast of -10K decline as it registered a second consecutive month of strong job growth. The unemployment rate declined from 6.0% to 5.8%. Full time employment increased by 41.6K versus a prior gain of 40K. Overall Australia generated more than 80K full time jobs in just two months – a remarkable achievement for a country with only 30M population.

Still many analysts remained sceptical about the accuracy of the date given the fact that the ABS is using new sampling techniques that may overstate the numbers. One key concern was the decline in work time which dropped by 12.1 million hours and does not jibe with the rising employment picture.

Nevertheless the trend in employment is clearly improving and it is borne out by other economic data such as Retail Sales which show that the Australian economy is making a successful transition to rebalance itself from mining sector led growth. At the very least the RBA now appears to be on hold for a considerable period of time as the Australian economy becomes far less sensitive to the price of iron ore. That should be good news for Aussie bulls as the pair appears to have found strong support at the .7000 figure and could now make another run at the near term highs at .7400.

One other possible implication of the strong Australian data is that Chinese economy may not be as weak as the market thinks, which would bode well for the Fed and its normalization process. USD/JPY also reacted positively to the news rising through most of the Asian and European trade to hit a high of 121.86. That’s still nearly 150 points lower than Friday’s close as the pair was decimated yesterday in heavy profit taking. Nevertheless if it can stabilize at these levels it may be able to stage another rally towards the 123.00 figure if the data proves supportive. Today;s docket only carries the weekly jobless claims numbers so any price action will likely have to come from equity or fixed income markets.

Generally this week the greenback has been the victim of profit taking as the markets continue to discount the expected FOMC rate hike amidst a very light economic calendar. However as we get closer to next Wednesday’s meeting the buck may catch a bid as interest returms.

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