The large revisions help rationalise the lacklustre market reaction following the announcement. Take the USD/JPY, for example. We saw an initial pop higher with gains swiftly pared, reflecting the mixed data. US equity indexes actually ended the day largely flat – a notably muted reaction for what would typically be considered a strong jobs print.
Regarding job growth, health care alone accounted for 82,000 positions. This narrow breadth, along with disappointing US data in the lead-up to the jobs report, could also have been behind yesterday’s messy price action.
Fed Implications
Although the jobs report was essentially a tale of two halves, I believe it provides the Fed some breathing room to focus on the inflation side of its mandate for now, as price pressures remain above the central bank’s 2.0% target.
Friday’s January CPI report will be interesting; economists expect the MM readings to remain around 0.3%, above the 0.1-0.2% pace needed to meet the Fed’s target. Both headline and core YY measures are forecast to ease to 2.5% from 2.7% and 2.6%, respectively.
Prior to the announcement, June was fully priced in for the Fed’s first rate cut this year, though July is now in focus (-27 bps). As of writing, March is pretty much off the table (-3 bps), with April’s meeting equally doubtful (-6 bps).
Market Snapshot and What’s Ahead
For Stocks, as I noted, US benchmarks were ultimately flat yesterday, though Asian equities continued to extend their gains overnight. South Korea’s KOSPI jumped 3.3% to refresh all-time highs of 5,522, with Australia’s ASX 200 also climbing 0.3% to 9,043. Japan’s Nikkei 225, however, ended flat, following strong gains this week after PM Sanae Takaichi’s landslide victory.
