Attention Shifts to US Jobs After Brexit Deal

Jobs Data Unlikely to Impact December Rate Hike

It’s been a lively start to trading on Friday and with the US jobs report still to come, it should be a very interesting end to the week.

The jobs report is widely regarded as the most important economic report each month but with tax reform and Brexit stealing the spotlight, not to mention Bitcoin, it’s been a little overshadowed so far this week. There’s perhaps also been a little less hype about it this month because a rate hike next week is already baked in and today’s numbers are unlikely to change anything on that front.

When it comes to next year, the Federal Reserve is currently anticipating another three rate hikes but with there still being so many unknowns – tax reform, open Fed positions etc – that could easily change. While the unemployment and NFP numbers tend to write the headlines, wage growth is arguably the most important piece of data we’ll get from the report. This has been lacking from the economic recovery in the US, despite unemployment falling to 4.1% and the absence of it has cast strong doubt over whether inflation will in fact move back towards its 2% target.

Sterling Slides After Brexit Phase One Agreement

After months of tough negotiations, the UK and EU this morning agreed to move on to phase two of Brexit talks which involves discussing trade and the transition period, pending approval from the European Council. Jean-Claude Juncker this morning confirmed that the European Commission will recommend to the EC that talks move on having come to an agreement on the financial settlement, citizens right and the Irish border, the last of which proved the most difficult to agree on despite months of back and forth over money.

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Despite an agreement being reached, the response to it was negative in the pound which came off its highs and remains lower on the day against the dollar. I think we’ve seen a classic case of the rumour being bought and the fact sold, with sterling having rallied early last week in anticipation of a deal being close then again on Thursday. We could see more upside in the pound in the coming months but as it was before, the road ahead is bumpy and that will be reflected in the currency markets. The pound will remain vulnerable to any suggestion that a deal may not be reached in time, as observed this morning when it tumbled in response to the suggestion by an EU official that a trade deal by March 2019 is unrealistic.

DAX Soars to 4-Week High on Brexit Progress

Bitcoin Slides on Profit Taking Ahead of CBOE Futures Launch

After two days in which we’ve seen a mammoth 42% gain in Bitcoin, depending on the exchange, the cryptocurrency is trading around 10% lower this morning having recovered slightly from a near 20% drop earlier in the day. This is just another reminder of how volatile the cryptocurrency space is and while the ride higher can be exciting, it’s not a one way street and the price can plunge just as rapidly.

Source – Thomson Reuters Eikon

I think what we may be seeing here is some profit taking ahead of the CBOE Bitcoin futures launch on Sunday, which some have suggested may open the door to short speculators who believe the price has risen far too quickly. It will certainly be interesting to see how the market responds to the launch of the contract, especially ahead of the CME launch on 18th December. The initial bounce after this morning’s sell-off suggests there’s still appetite for buying dips but that may not last if we don’t see the kind of rebound witnessed previously. Saying that, the way Bitcoin is trading at the minute, I don’t think anyone would be surprised to see it end the day in the green.

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