Today’s single most important number will be the US December employment report, but before that Markit’s Service PMIs for European countries will be of interest. Germany’s retail sales and the Eurozone’s flash inflation report are also on today’s agenda. At least one of today's four Federal Reserve speakers will be over-interpreted: Plosser (18:15), Lacker (18:30), Yellen (20:30), Bullard (22:30), all times GMT. Europe December Markit Service & Composite PMI (08:15-09:30 GMT)
The manufacturing PMIs published on Wednesday were on the weak side – below expectations and showing continuing recessionary tendencies even in the core countries. My TradingFloor.com colleague James Picerno covered the European manufacturing PMIs and US ISM Manufacturing index on Wednesday - check the post-event comments at the bottom as well. The service PMIs are expected to confirm what the manufacturing side has already said, and no huge surprises are to be expected – the sudden uncertainty over the Fed’s policy is driving the markets now. EURUSD traders should still be careful around the publication times. Press releases with commentary and graphs will be published on the Markit’s website. Schedule: 08:15 Spain, 08:45 Italy, 08:50 France, 08:55 Germany, 09:00 Eurozone, 09:30 UK. Note that the numbers will be published two minutes earlier on Reuters. US December Employment Report (13:30 GMT):
Consensus sees the US economy adding 160k jobs in December versus 146k in November, with the unemployment rate seen unchanged at 7.7 percent. However, yesterday’s weekly jobless claims and the private ADP estimate for 200k new jobs in December mean that many are now expecting a higher number from the Bureau of Labor Statistics: Nordea calls for 170k, while Goldman expects 200k. The unemployment number is now vital for the financial markets because of the conditionality attached to the Fed’s asset purchases, i.e. the targeting of an unemployment rate of 6.5 percent. Just extrapolating the recent trend of the unemployment rate suggests that the 6.5 percent level could be reached in early 2014. Yesterday’s Federal Open Market Committee minutes showed that some voting members would like to see an end to quantitative easing sooner than market participants had previously thought (see Steen Jakobsen’s comments). Assume that the unemployment rate would drop to around 7.2 percent next summer – the markets are discounting that the Fed would decrease the rate of QE at that time. As a large part of the currently high prices of risk assets are due to the central banks’ printing, we are again in a situation when good news is neutral or even bad for prices. Picerno did a good job commenting on yesterday’s weekly jobless claims in his blog.
US November Factory Orders (15:00 GMT)
are expected to show a monthly increase of 0.1 percent, after October’s surge of +0.8 percent. To an extent, November is already old news – but as new orders are by their nature good predictors of coming manufacturing activity, the report could provide some activity in stock indices, but probably not EURUSD. At the same time with the factory orders we also get the December ISM Non-Manufacturing Report, and after the strong ISM Manufacturing earlier this week, a clear result above 50 is now expected for the service sector.