Friday saw the US January Jobs reports come in very strong

Fundamental View

Friday saw the US January Jobs reports come in very strong, posting 257k on the headline with the largest increase Weekly Average Earnings since November 2008, showing an increase of +0.50% MoM. We also saw large upgrades to December and November’s payrolls numbers. This lead to mass dollar strength as the EURUSD proceeded to test the low set on the 4 and evident monthly and yearly wage growth: The jobs created have been seen as being of higher quality and thus the dollar weakening phase we saw over the first half of last week has ebbed somewhat. Stocks closed slightly down on Friday as participants began to price in changes or the complete removal of the “patience” rhetoric in the Fed statement. With Yellen’s meeting in March fast approaching, many are looking for the next batch of employment reports in order to gauge the likelihood of policy language alterations and thus are pricing in new fair values. The S&P 500 has lifted since but we are still holding mid-range, above the 2000 handle. Over the weekend we have seen the likelihood of a Greek exit from the Eurozone increase. Tsipras has committed his government to reversing certain aspects of the previous government’s settlement, looking to revaluate pensions, public sector spending, wages and taxation. This surprised the majority of the market as many were settling down after a series of seemingly amicable talks between the Greeks and their other European counterparts. This bipolarised political stance has led to an extension to the downside in European equity bourses this morning as Greek exit risk becomes more prevalent due to the lack of agreement between both parties. Greece has refused any extension to their bailout programme in order to remove the austerity measures forced on them.

Today’s View

Overnight we saw Chinese Trade Balance posting a record surplus of $60bln, highlighting a fall in demand for Chinese exports, a contraction in domestic demand and potential warnings signals for China’s Growth forecast for 2015.This morning we had Germany’s trade balance figures for December, exporting 19.1bln of goods and beating expectations. Ahead we have relatively light calendar with only tier 3⁄4 data releases to come. We have the results of the ECB’s covered bonds and ABS purchases and also the change of Labour Market Conditions from the US. The largest scale release is Draghi, who will be speaking to G20 Finance Ministers and Central Bank Governors. The largest moves we have seen this morning came off of news that France has once again been attacked, reports of a group of hooded gunmen attacking police officers in Marseille. This release comes just hours ahead of the French Prime Minister’s visit to the city later today. Whilst this event has caused little in the way of headline moves it has aided the Euro-weakening trade to extend lower, in conjunction with Greek exit risk, and the EURUSD is currently testing the 1.1300 handle.

Alternative View

Although there is very little calendar risk today there are several other events to be aware of and traders are advised to remain extremely reactionary to any developments coming from Greece or France.