Daily Market Commentary 8th January 2022

Non Farm Payroll had yet another major miss on expectations in Friday trade, in the USA. NFP came in at 199,000 jobs added for the month, with expectations of over 400,000, while the headline unemployment rate fell to 3.9%. There are more than 10 million job vacancies in the US economy and the headline rate reflects the lack of participation and the structural imbalance in the labour market. This all adds up to very bad news for the US economy and equity markets are reflecting this, with a huge 4% loss for the week on the NASDAQ, while the S&P contracted 1.8%.

Fed Minutes, released during the week, revealed the Central Bank has been forced into battle against rampant inflation. The Federal Reserve Board Members are considering at least three rate rises for 2022, ending QE and replacing it with QT. This shook markets and sentiment, because reality is sinking in, as many had expected the Fed to continue to prevaricate. The Fed continued to label raging inflation as ‘transitory’, when it was obviously structural, now leaving a monumental task to bring it back under control. US 10 year Bond Yields topped 1.8%, on Friday, following sharp rises for the year.

The USD declined after the Non Farm Payrolls number, with the EUR rising to 1.1360, while the GBP approaches 1.3600. Commodity currencies also benefitted the softer reserve, with the AUD pushing back up to 0.7170, while the NZD inched back to 0.6770. The coming week will be dominated by inflation and growth data releases, across the globe, which will dominate the economic narrative for the week.