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Well, that was anticlimactic”¦

Much-awaited jobs reports in Canada and the United States both managed to hit expectations this morning, keeping volatility contained.

North of the border, Canada created more jobs than expected, generating 35,400 new positions last month. Things look far less pretty below the headline number however, where it becomes clear that the gain was purely driven by part-time jobs. Full time roles fell by 11,800, while 47,200 part-time (likely seasonal ) positions were created. The Canadian dollar rose on the headline,  and fell on closer examination.

In contrast, the world’s largest economy added 257,000 new jobs, and hourly wages increased by 0.5% in January. Forecasts ahead of the release had concentrated around the 230,000 mark, meaning that market participants are broadly maintaining  expectations for a mid-year rate hike in benchmark interest rates. The country has now added more than 200,000 jobs a month for over a year – a performance not seen since the mid-nineties.

The impact on the dollar was negligible, however. Globally, traders appear to be edging out of the overwhelmingly long dollar positions built over the past six months. Commodity prices, emerging market equities and inversely correlated assetshave stabilized throughout the week, triggering much-needed reversals in a number of currencies. Oil prices in particular have staged a strong rebound, with West Texas Intermediate climbing almost six percent during yesterday’s session as investors bet that declining rig counts and Chinese stimulus efforts would act to reverse the tide. As the peak summer driving months approach, there are reasons to believe that black gold could regain some lustre, but gains are likely to be limited as economies continue to struggle.

Developments within the euro area continue to keep corporate treasurers and German taxpayers awake at night. Fears that Greece could exit the common currency zone have given way to optimism over a possible debt deal several times over the past week, driving the exchange rate from one end of its trading range to the other. Negotiating positions hardened after meetings yesterday, when German Finance Minister Wolfgang Schaeuble said, “We agreed to disagree”, and his Greek counterpart Yanis Varoufakis replied, “We didn’t even agree to disagree from where I’m standing,”

Few expect a Greek exit to be the thread that unravels the eurozone, but a nagging sense of worry is spreading across the financial markets as participants seek to understand the potential implications for the banking system and the broader economy.

We suspect that something of a tempest in an amphora is brewing; more than 80% of Greek debt is now held by other governments, the European Central Bank is committed to providing vast amounts of liquidity to the financial system, and the major economies are far more robust than they were several years ago. More to the point, Greece has spent more than 50% of the years since 1800 in default or restructuring – meaning that another default is unlikely to come as a shock.

A failure to come to agreement before the February 28th deadline could prove messy nonetheless. Prepare for further volatility in the week ahead, and have a fantastic weekend.

In our latest podcast, we do an  Aussie Analysis, Greek Grindings and Oil Optimism.

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