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Market overview

The US non-farm payroll report delivered a beat on expectations, with the July jobs gain recorded at 209k (consensus 180k, Investec 185k). There were also upward revisions to estimated jobs gains in May and June. Adding to the positive tone of the report, the headline unemployment rate ticked down to 4.3% from 4.4% (consensus and Investec 4.3%). The pay growth figures had been an eagerly awaited part of last week’s report, given the Fed’s recent focus on the moderation in inflation and lack of upward momentum in wage growth. Here wage growth held steady at 2.5% y/y, delivering a slight beat on the 2.4% consensus, but not by enough for the Fed to conclude that an upshift in pay growth was soon to be upon us. Overall, the figures look to be risk sentiment positive, providing reassurance on the health of the jobs market and ongoing employment gains, without a red flag that might spur the Fed into more aggressive rate rises. The USD firmed after the figures and ended the week on a positive note.

The Eurozone saw the unemployment fall to 9.1% from 9.2% in June and core CPI inflation edge up to 1.2% from 1.1%. Q2 GDP came in at +0.6%, 2.1% y/y, and the composite PMI was revised down a tick to 55.7. The Euro kept on going last week, trading above 1.1900 briefly, until the US employment data on Friday afternoon. With growth in line with expectations and PMIs revised down, the Euro strength can’t easily be explained! Will this strength continue? For now at least, optimism in the Eurozone is likely to remain.

In the UK, the MPC met, talked, and did nothing. The vote was in line with expectations at 6-2 and yet the pound fell. The BoE August Inflation Report was published at the same time presenting a slightly more dovish picture than in May, with the medium term growth, inflation and wage projections pushed down. 

The day ahead

After a busy calendar week last week, the summer lull restarts today. The main events of the week are UK industrial production on Thursday and US inflation on Friday. There is no notable data out today but we will have speeches from Fed’s Bullard and the Fed’s Kashkari.

Thought of the day

Over the weekend we saw two of the greatest athletes in history run their last track races in the Olympic Stadium. Usain Bolt and Mo Farah have had glittering careers and for both, their heroics in the East London stadium have helped propel them to global stardom. Four time Olympic champion Farah has become the superstar of distance track racing as he has won all the major titles since the London Olympics and didn’t disappoint on Friday as he won a thrilling 10,000m. It was a different story for Bolt however, as he was unable to retain his World Champion’s crown, losing to Justin Gatlin in the men’s 100m. It wasn’t quite the fairy tale ending that many had hoped for but sport can always throw a curveball no one expects! Speaking of curveballs, if the recent Euro strength versus Sterling is causing you a headache or if you are struggling to keep up with the surprises Trump keeps throwing our way, call the Investec Dealing team on 0800 055 6339 to see how we can help to manage your risk.

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