Canadian Employment Soars On Service Sector Hiring

Fundamental Headlines

• Retailers Continued Comeback Into January – Wall Street Journal
• U.S. Futures Track Overseas Losses– Wall Street Journal
• Risk aversion spreads as debt fears grow - Financial Times
• Stocks Decline, Euro Retreats to Eight-Month Low on Deficits, Jobs Concern – Bloomberg
• G-7 Splits Hurt Investor Confidence as Ministers Seek Exit Plan in Arctic - Bloomberg


GBP/USD –  U.K. factory gate prices rose to 3.8% from 3.5% which was the highest since 2008. A rise in costs for oil and raw materials led  then increase, offsetting slim reduction in food and apparel. Surpassing economist’s forecasts of a rise to 3.5% signal that inflation may push above the BoE’s threshold of 30.0%, forcing Governor King to write a letter of explanation to government officials. The central bank paused their asset purchase program and if consumer prices continue to rise they will find themselves in a difficult situation. The U.K. economy has several hurdles to clear from a growth standpoint and rising inflation will only discourage domestic spending which is needed to offset ending stimulus efforts. A 8.4% rise in input costs for producer against expectation of 6.5% could translate in increasing upside risks if manufacturers can pass costs onto consumers which disputes the MPC’s contention that prices will fall back below their 2% target. To discuss this and other topics, please visit the GBP/USD Forum.

USD/CAD –  The Canadian economy added 43,000 jobs which far and away exceeded the 15,000 that economist were expecting. It was the fourth time in the last six months that the commodity driven economy has generated positive results signaling that the economy is more than surviving absent U.S. demand. A 66,100 gain in service jobs speaks to the strength of domestic growth but companies remain cautious with 41,500 part-time hires. A drop in manufacturing of 15,700 is concerning as goods producers may be cutting staff in anticipation of a slowdown in global demand. Indeed, China has taken measures to cool its economy and the IMF has suggested that India begin tightening to curb soaring prices.  To discuss this and other topics, please visit the USD/CAD Forum.