US nonfarm payrolls posted a paltry gain, pointing to a slow recovery for the world’s largest economy. With the resurgence in Covid-19, economic conditions across the major economies are difficult. This week’s focus is on inflation in the US and Germany, and GDP in the UK.
Eurozone inflation was unexpectedly strong in January. Headline inflation rose to 0.9% while core CPI improved to 1.4%. German Factory Orders fell by 1.9%, its first decline in eight months.
Strong UK employment numbers gave sterling a slight boost early last week. Wage growth jumped to 3.6%, up sharply from 2.7%. Unemployment rolls rose by just 7 thousand, well below the estimate of 47.5 thousand. The unemployment rate nudged up from 4.9% to 5.0%, its highest level since March 2016.
The Bank of England maintained interest rate and QE levels at its policy meeting. BoE Governor Bailey assured the markets that the BoE was not signaling that it planned to introduce negative interest rates, although the BoE did tell banks to be prepared for such a scenario.
In Canada, January’s employment numbers were dismal. The economy shed some 212.8 thousand jobs, a second straight decline and much weaker than the estimate of -43.5 thousand. The unemployment rate jumped from 8.6% to 9.4%, its highest level in five months. This missed the forecast of 8.9%.
U.S. Nonfarm Payrolls disappointed with a negligible gain of 49 thousand, which didn’t even reach the forecast of 85 thousand. Wage growth rose 0.2%, down from 0.8% beforehand. There was better news from the unemployment rate, which dropped from 6.7% to 6.3%, its lowest level since March.
- German Final CPI: Wednesday, 7:00. Inflation has struggled but improved in December with a solid gain of 0.5%. The upward trend is expected to continue, with a street consensus of 0.8%.
- US CPI: Wednesday, 13:30. The financial markets are paying closer attention to inflation, which is showing signs of resurgence. Headline inflation rose to 0.4% in December and an identical gain is expected for January.
- UK Prelim GDP: Friday, 7:00. After the huge swings in GFP in the past two quarters, GDP is expected to show a negligible gain of 0.5%. An unexpected reading could affect the movement of GBP/USD.
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- USD/CAD forecast – Canadian dollar analysis
- Forex weekly forecast – Outlook for the major events of the week.
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