Headline US employment data was well above consensus forecasts with a 312,000.

Headline US employment data was well above consensus forecasts with a 312,000 increase in non-farm payrolls and stronger wages growth.

Fed Chair Powell’s comments were broadly dovish with caution and a suggestion that further rate hikes would be postponed for now to assess economic developments.

The dollar reversed gains seen after the employment data and registered net losses as shorter-term yields declined.

Global risk conditions strengthened on a combination of reduced growth fears and hopes for a more accommodative Fed policy with commodity currencies gaining ground.

Wall Street indices moved sharply higher and international indices made solid gains as Chinese monetary easing also underpinned sentiment.

Fed Chair Powell played down the immediate importance of the weak ISM data, especially given strong jobs data. He also stated, however, that the central bank would be patient in watching data and would be prepared to adjust the policy stance quickly if financial conditions tightened. He also commented that the Fed is sensitive to the message from markets and could react quickly if necessary. Balance sheet reduction would also be re-visited if it concludes that the current plan is causing problems.

The Nationwide house-price index declined 0.7% for December with annual growth of 0.5%, the slowest since February 2013. UK PMI services-sector index increased to 51.2 for December from the 28-month low of 50.4 previously, although underlying activity remained limited and business confidence was eroded by Brexit uncertainty which curbed Sterling support.

There were also sharp losses against the dollar following the payrolls data with GBP/USD lows just below 1.2620 before a sharp reversal following Powell’s comments with a move back above 1.2700. The UK currency also secured wider gains with GBP/EUR bounced from 1.1000 as improved conditions surrounding global risk appetite underpinned UK sentiment.

Markets remained wary of political tensions with parliament returning from recess on Monday and manoeuvring set to intensify given that there is still no evidence of Prime Minister May being able to win next week’s scheduled vote on the Brexit agreement. Firm global risk conditions remained a positive factor on Monday with Sterling resilient and GBP/USD near 1.2750.

Economic Calendar

07:00German Factory Orders (M/M)(NOV, 2018)-0.20%0.20%
07:00EUR German Retail Sales (Y/Y)(NOV, 2018)-0.70%5.20%
07:00EUR German Retail Sales (M/M)(NOV, 2018)0.40%-0.30%
09:30Euro-Zone Sentix Investor Confidence(JAN)--0.3
10:00Euro - Zone Retail Sales (Y/Y)(NOV, 2018)-1.70%
10:00Euro - Zone Retail Sales (M/M)(NOV, 2018)-0.30%
15:00CAD Ivey PMI(M/M)(DEC, 2018)-57.2
15:00USD Factory Orders(NOV, 2018)0.70%-2.10%
15:00USD ISM Non-Manufacturing PMI(DEC, 2018)6060.7
15:00CAD Ivey PMI(M/M)(DEC, 2018)-57.2
17:40FOMC Member Raphael Bostic speech--

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.