Wages not jobs
The nonfarm payrolls component of Friday's US employment report was rubbish yet the dollar went up. Investors knew the payroll figures were a weather-related aberration so they looked at wages instead.
The monthly change in US nonfarm payrolls is possibly the most globally-important ecostat. Under normal circumstances (whatever they are) the unexpected loss of 33k jobs in September would have sent the dollar tumbling but on Friday it was followed by a half-cent rally. Because of the significant impact of hurricanes around the Gulf of Mexico in September investors were steeled for an unusually low number, if not quite a negative one, so they looked elsewhere for inspiration.
And they found it. Labor force participation ticked up from 62.9% to 63.1% and the rate of unemployment went down from 4.4% to 4.2%. Wage growth accelerated from 2.5% to 2.9%. Simply, the headline payrolls number was distorted by the number of people - a million and a half - who could not turn up for work because of the weather. Overall, then, the data contained nothing to discourage the Federal Reserve from its presumed December rate increase.
Sterling took a heavy hit from Thursday's story that a faction within the ruling Conservative party was trying to unseat prime minister. It lost -0.6% on the day. From Friday to Monday the NZ dollar was the laggard after it was confirmed that there will be no overall parliamentary majority.
With all the overseas ballot papers counted at last New Zealand's National party has 56 seats and the Labour/Green group has 54. With 9 seats that gives the nationalist NZ 1st party the role of kingmaker. It was not exactly the result hoped for by investors.
Nor were those investors overjoyed to witness another flare-up in the war for control of the parliamentary Conservative party. They saw it as another distraction from the government's efforts to reach a Brexit deal with the EU and they punished sterling accordingly. Between Thursday morning and today's opening the pound and the Kiwi suffered equally, falling by an average of -0.7%. The pound lost one euro cent and one and a half US cents.
The Turkish lira gapped lower this morning because of a dispute between Ankara and Washington that has brought mutual visa issuance to a stop. The euro has so far failed to react to the conflict between Barcelona and Madrid but that could change if Catalonia declares independence.
Investors see the Turkey/US situation as another symptom of the country breaking its ties with the West. They are not sure where it will led but it does not fill them with enthusiasm for the lira. As for the unease in Catalonia, their assumption is that it will all die down as the Spanish government takes control. A unilateral declaration of independence would shatter that relaxation at a stroke.
Ecostats are few and far between today. Euroland investor confidence and BRC retail sales. That's it.