Decent US Data ahead of Payrolls | Xtreamforex

Today brings this week’s most important data releases both from the Euro area and the US.

In Euro area, flash inflation print for December will be released. Individual country data released thus far suggest that while headline inflation probably continued to decline in December, underlying price pressures remain strong. Consensus is looking for core inflation to have picked up from 5.0% in November to 5.1% in December. Going forward, interpretation of euro area inflation data will become more and more cumbersome as country-specific fiscal measures that compensate households for the rising energy costs will also affect consumer price developments.

In the US, it is time for December payrolls. Consensus expects 200k new jobs while a figure around 100k would be consistent with demographic developments and any higher number implies labor shortages are likely to prevail in US jobs market, upholding wage and price pressures. We will also get IMS Services index where consensus looks for a decline to 55.0 in December from 56.5 in November. Factory orders are also expected to have declined in November.

Heading into the payrolls release today we got some tier-2 data out yesterday. Initial jobless claims showed a downward surprise with a decline to 204k still signaling a robust labor market. The ADP employment report also surprised to the strong side rising 235k in December from 182k in November. While it is not a great predictor of non-farm payrolls it still indicates decent labor demand in line with the job openings data released earlier this week, which were also better than expected and pointed to still strong demand for labor.

ECB member Villeroy said yesterday that the ECB should reach the terminal rate by summer and then hold suggesting rates would stay there for some time. He also stated that the ECB should be pragmatic and not become obsessed with rate increases that are too mechanical. Markets price close to 150bp of further hikes by summer. Central banks have gotten much relief on the inflation front from falling commodity and freight prices but the tight labor markets remain a challenge.