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North American jobs diverge

Opinion polls buoy sterling

The pound had another positive day on Thursday, strengthening by an average of 0.3%, and came off the boil on Friday. UK economic data played no part, though the 1.0% monthly rise in the Halifax house price index did sterling no harm. Once again it was the prospect of a Conservative government that provided most support. 

The latest opinion polls give the Tories 43.2% of the vote with Labour on 33.2% and the LibDems at 12.0%, suggesting a majority of 40 to 50 seats in the Commons. Whilst the Prime Minister acknowledges that "we are fighting for every vote", investors are expecting that he will be the winner on Thursday and seeing further upside for the pound.

Since Parliament granted Johnson his General Election on 29 October, sterling has added an average of 1.7% against the other majors, losing out only to the recovering NZ dollar (0.7%) and Swedish krona (0.2%). It is 5.3% above its position at the turn of the year. 

Good jobs, bad jobs

The big news on Friday was the North American employment data, which sent the US and Canadian dollars in opposite directions. US nonfarm payrolls increased by many more than forecast while in Canada they slumped. The Loonie lost nearly half a US cent at a stroke and is down by four fifths of a cent against sterling.

In the States, an impressive 266k new jobs blew away predictions of a 180k increase and took the rate of unemployment down to 3.5%. Together with revisions to earlier months it meant an unexpected 127k extra people in work. There was also help for the dollar from the Michigan consumer sentiment index, which rose by more than two points to a provisional 99.2.

It was a very different story north of the border as employment fell by 71k, the biggest monthly decline since the global financial crisis, and unemployment jumped from 5.5% to 5.9%. The numbers raise the prospect of a rate cut by the Bank of Canada in the new year.

Under the radar

A couple of the numbers from Europe on Friday were flaky but not damaging to the euro. German factory orders fell 0.4% in November for a 5.5% annual decline. Miraculously, that annual figure was better than expected. The euro zone economy expanded by 0.2% in the third quarter, as predicted.

The numbers made little difference to the euro's value. A bigger-than-expected 0.6% monthly decline in Euroland retail sales also did no damage, and nor did another dismal set of German industrial production data. Over the weekend, more gloom was to be found in the Chinese trade data. Total exports fell 1.1% in the year to November and exports to the United States were down by 23%.

Data from Japan this morning showed gross domestic product expanding by 0.4% in Q3, twice as much as expected. The yen hardly budged. With Swiss unemployment (unchanged at 2.3%) and Germany's trade surplus (exports up, imports flat in October) already out of the way there is little else for investors to pitch at during the London session.

GBP: Election optimism positive for the pound

GBP: Election optimism positive for the pound

USD: Higher on strong employment data

USD: Higher on strong employment data

CAD: Lower on weak employment data

CAD: Lower on weak employment data

EUR: Dodges poor manufacturing figures

EUR: Dodges poor manufacturing figures

CNY: Exports to the USA crumble

CNY: Exports to the USA crumble

JPY: Unmoved by above-forecast GDP

JPY: Unmoved by above-forecast GDP

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