- US NFP shows weaker wage growth
- Trade deal will do little to spur growth in Asia
- German industry still in troubles
US – weaker NFP could hurt the USD
The December NFP report came in below expectations, showing 145k of new jobs but after a stellar November report that’s not a problem at all. In fact the 2019 average (176k) is not far below the 2011-2018 one (202k) and in any case higher than one would anticipated a year ago. Having said this, wage growth deceleration, this time fueled by manufacturing jobs, is somewhat concerning, especially if it reflects business uncertainty (remember, US ISM indices declined significantly throughout 2019). This shouldn’t be the case with the unemployment rate at record lows. This will only make the Fed even less likely to consider increasing interest rates, a factor that could weigh on the dollar.
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Wage growth in the US has reversed lower. Source: Macrobond, XTB Research
Key economic event this week: CPI data (Tuesday, 1:30 pm GMT)
Asia – do not expect fireworks from the PhaseOne
There has been some positive news from Asia lately. Most notably, the Korean PMI returned above the 50-points mark for the first time since April last year. This likely reflects some recovery in semiconductors industry across the region. Then again, we expect China to be a burden on region growth prospects. The residential market cannot keep contributing at the pace from previous years and the much hyped PhaseOne trade deal will do little to boost growth. One may notice that the change in tariffs is very symbolic (the biggest thing is removing tariffs that were never introduced!). Therefore, the biggest boost could potentially come from sentiment. There is a catch, though. President Trump says that the PhaseTwo deal could come after elections and that could mean… never.
A vast majority of TradeWar tariffs will remain in place. Source: XTB Research
Key economic event this week: GDP in China (Friday, 2:00 am GMT)
Europe – German manufacturing keeps struggling
Economic prospects in Europe will depend on German manufacturing – at least to a significant extent. November reports brought no breakthrough. Industrial report slid by 6.1% y/y, more than in October (-4.6%) although this was partly seasonal. In adjusted terms output increased 1.1% from October, more than anticipated. The good news stops here. Industrial orders and exports tumbled: by 1.3 and 2.3% m/m respectively, showing weak demand (especially external). From the market perspective, even if there’s turnaround, it already seems to be factored in.
Even if there’s recovery, it’s been already priced in. Source: Macrobond, XTB Research
Key economic event this week: UK CPI (Wednesday, 9:30 am GMT)
