Friday saw the release of headline jobs data in the States as the non-farm payrolls number was released. After a bumper figure last month of 313k the market was braced for potential revisions and a softer number than previous. The figure released certainly disappointed as the print of 103k was underwhelming. However, last month’s strong number was revised up to 326k. Bad weather was cited as one possible reason for the significant reduction in jobs created, with construction jobs falling (-15k) for the first time since last July. Markets looked to other releases for the full picture of employment. US average earnings rose by 0.3% month on month for March, in line with expectations. On an annual basis, wage inflation grew 0.1% to 2.7%. The unemployment rate in the US remained unchanged at 4.1%. However, a number of analysts are expecting the unemployment rate to fall into 3% territory over the next few months.  

The dollar weakened across the board as the markets were disappointed with the headline numbers. GBPUSD moved from 1.4024 accelerating to a one week high of 1.4107. EURUSD also had a roller-coaster ride, initially posting a one-month high against the Euro, before the downbeat jobs report propelled EURUSD back to 1.2300.

Later in the evening, a speech by Fed Chair Jerome Powell suggested the Fed is likely to keep raising interest rates to keep inflation under control, remarking that the labour market appeared close to full employment and that inflation was poised to rise towards the Fed’s 2% objective in the coming months. “As long as the economy continues broadly on its current path, further gradual increases in the federal funds rate will best promote these goals”. Powell also added that it was too soon to know if rising trade tensions would hit the US economy. 

Following Trump’s statement on Thursday that he had instructed US trade officials to consider $100bn in additional tariffs on China -  ‘In light of china’s unfair retaliation against previous US tariffs’. China’s ministry of commerce said it would take new comprehensive measures to safeguard the country’s interests if Trump continues his protectionist behaviour. So watch this space for further developments on the tit-for-tat trade wars, with a landmark speech from President Xi Jinping scheduled for tomorrow.

The week ahead

In the UK, we suspect that Brexit news will remain relatively quiet over the coming week with Parliament in recess until 16 April. Instead, the focus is likely to be on data releases, with industrial output and trade figures for February due on Wednesday. On the retail front, the BRC retail sales monitor is set for publication providing information on the extent to which retail sales suffered at the hands of heavy snow through March (tonight). From the Bank of England, the Credit Conditions and Bank Liabilities surveys are due, whilst BoE Governor Mark Carney is being honoured at an event in Toronto. In the Euro area, the data calendar for the week ahead looks relatively light with February’s industrial production figures likely to be the main focus for markets on Thursday. Italian government formation discussions are set to continue next week, although a quick agreement on a final government arrangement seems a way off. The US release producer price index tomorrow afternoon, consumer price index on Wednesday, import and export price index on Thursday before finishing the week with a speech from Fed member Bullard and the Michigan consumer sentiment index.