Dukascopy Bank Team
Dukascopy Bank SA
Fundamental Analysis
Key highlights of the week ended December 30
European Union Manufacturing activity in the Euro zone rose markedly in the last month of 2016, a private survey showed on Monday. IHS Markit reported its final Purchasing Managers' Index for the region's manufacturing sector advanced to 54.9 points in December, unchanged from the preliminary reading and up from November's 53.7. Moreover, consumer prices increased rapidly in the Euro zone last month, official figures revealed on Wednesday. According to Eurostat, the Consumer Price Index came in at 1.1% year - over - year in December, after rising 0.6% in the preceding month. This was the strongest rate since 2013 and the first time the index remained above 1.0% for over 36 months. The Core CP I, which kept the overall inflation rate lower in 2016, advanced from 0.8% to 0.9% and topped economists' expectations for an unchanged reading.
US
Growth in the US economy's manufacturing sector improved more than expected last month, official figures revealed on Tuesday. Th e Institute of Supply Management reported its Purchasing Managers' Index advanced to 54.7 in December, surpassing analysts' expectations for 53.7 points. Meanwhile, the number of Americans filing for first - time unemployment benefits declined to a eight - week low, official figures revealed on Thursday. However, the following drop in claims was almost certainly exaggerated due to the Christmas holiday. According to the US Department of Labor, national jobless claims declined 28,000, to 235,000, during the week ending December 30, reaching their low est level since the middle of November. Even though initial jobless claims reached their eight - week lows, the economy created just 156,000 new jobs during December, down from November's revised gain of 204,000 and below analysts' forecasts. Meanwhile, the unemployment advanced to 4.7% in December from November's 4.6%, however, the rise was mainly driven by the fact that more people entered the labour ma rke t during the reported period.
UK
Manufacturing activity in the United Kingdom climbed to 56.1 in December, compared to the preceding month's 53.6. That was the highest reading in 30 months. Market analysts anticipated a slight decrease to 53.3 during the reported period amid the country's dec isi on to leave the European Union. Furthermore, UK construction activity advanced at the fastest pace in nine months in December, supported by a rise in house building, a survey revealed on Wednesday. Markit/CIPS said its Construction PMI for Britain increased unexpectedly to 54.2 po int s during the reported period. This was its highest rate since March, while market analysts anticipated expected the Index to remain unchan ged at the preceding month's reading of 52.8. The latest surveys for the construction and manufacturing industries suggest that the British economy gained momentum by the end of 20016.
USD
"The economy is probably close to full employment. We're clearly seeing evidence that wage pressures are starting to build ".
- Jim O'Sullivan, High Frequency Economics
The US economy created less jobs than expected in the last month of 2016, disappointing markets. The US unemployment rate rose in line with analysts' expectations from 4.6% to 4.7%, while the participation rate climbed from 62.6% to 62.7%. The report also showed US nonfarm payrolls advanced 156,000, while markets anticipated a gain of 177,000, following the previous month's increase of 178,000. Official data published by the Bureau of Labor Statistics showed manufacturing employment advanced 17,000 in December, despite small decreases in two previous months. In the meantime, there was also a slight fall in construction jobs and decline of over 15,000 in temporary help-services jobs. Nevertheless, government employment increased 12,000. In the meantime, the BLS said the Average Earnings Index jumped 0.4%, compared to a 0.1% decrease in November, which boosted the annual rate from 2.5% to 2.9%, the strongest gain since June 2009. Despite mixed economic indicators, the data is likely to maintain confidence in the job market and analysts' expectations for the Federal Reserve's rate hikes in 2017.
After the report, the US Dollar strengthened immediately. The EUR/USD pair dropped to 1.0550, while the USD/JPY held steady at 116.50.
CAD
"This is very hard to square with the incoming data on real activity, however, with the decline in October monthly GDP suggesting that fourth-quarter GDP growth was around 1% annualized. If both are correct, that must mean Canada is experiencing a big slump in productivity".
- Paul Ashworth, Capital Economics
Canadian economy created 53,700 new jobs in December, following the prior months' gain of 10,700 and surpassing the 5,000 decline forecast, official figures revealed on Friday. The data also showed the unemployment rate rose from 6.8% to 6.9% last month, in line with analysts' expectations as more people entered the labor market. According to Statistics Canada, full-time jobs rose 81,000, while part-time positions declined 27,000.For all of 2016, full-time employment advanced 0.4%, while part-time jobs advanced 4.5%. Overall, the Canadian economy created 214,000 new jobs during the past year, the biggest gain since 2012. Furthermore, the goods-producing sector saw a gain of 1,700 jobs in the last month of 2016, however, there was a yearly decline. Manufacturing jobs slid 3.1% over the last year despite a December increase. The services sector created 50,000 new positions, with the biggest gains registered in the technical, scientific and professional sectors. Employment growth is expected to boost economic confidence in the upcoming months.
After the release, the Canadian Dollar rose against other major currencies, trading at 1.3200 against the US Dollar and 1.3950 against the Euro.
This overview can be used only for informational purposes. Dukascopy SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained.
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