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The Greenback Sags After Weak US Payroll Report

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The Greenback Sags After Weak US Payroll Report

The dollar edged lower on Friday after the US jobs report. Yields declined nearly 10 basis points closing near 2.90%. UK yields edged lower on Friday after the country released official industrial and construction output which was worse than expected. Germany and France on the other hand released stronger than expected data which help buoy the Euro.

UK Industrial Production surprised market participants by printing a flat reading compared to the 0.4% expected by economists. This compares to the UK’s manufacturing PMI which rose to a new 2-year high of 58.1 from 56.5. Similarly, the construction PMI had risen from 59.4 in October to what appears to be a record high of 62.6 for this relatively new series. However, today’s construction output report showed a 4.0% fall.

Taken together both the industrial and construction out reports should cool calls seen this week for a BOE rate hike. The implied yields of short-sterling futures have eased a few basis points and 10-year gilts yields are pulling back from 3%, dipping below similar US yields.

In contrast, following Germany’s stronger than expected industrial production figures yesterday, France and Spain reported better industrial production figures today. The former rose 1.3% in November. This is three times more than the market had expected and also in contrast to the weak PMI readings. Spain’s industrial output rose 2.7% on a year over year basis compared with a 2.0% forecast.

China’s December trade surplus came in smaller than expected. Exports rose 4.3% year over year vs. 12.7% in November, while imports rose 8.3% from 5.3%. Exports were lower and imports higher than expected, leading to a $25.6 billion surplus vs. forecast for $32.2 billion.

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Sterling rallied after the US payroll report, testing resistance near the recent highs at 1.6550.

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