Markets
US payrolls defied the (near-)boldest of expectations as well as broke the downward spiral that originated from last week’s second-tier labour market data. January job growth came in double the 65k expectations. Narrowed down to the private sector, employment even grew 172k. But growth wasn’t particularly broad-based, with a big skew towards health & social assistance sector (+124k). Professional business services came in second (+34k) while transportation & warehouse, IT and financial activities all shed jobs. In contrast, manufacturing (+5k) printed job increases only for the second time in the last two years (the previous occasion being November 2024). The unemployment rate unexpectedly ticked down to 4.3% from 4.4% even as the participation rate rose to 62.5%. Wages grew slightly faster than expected on a monthly basis (0.4% m/m) but that came after a downward revision to the December print. The January job report edition came with the annual benchmark revision, leading to a significant alternation to the job numbers for the period stretching April 2024 through March 2025. The -862k downward adjustment was broadly in line with the -825k expected though. Including the yearly seasonal adjustments which the BLS recalculates each January, average job growth for 2025 amounted to just +15k instead of +49k prior to the revision. Either way, today’s numbers wrongfooted markets who were increasingly betting on faster and more Fed rate cuts. It resulted in a kneejerk upleg in US yields ranging between 3.5-7 bps in a textbook bear flattening move. The timing for a Fed rate cut is being pushed backward again from June to July. The next key input that might affect expectations will be Friday’s CPI report. European/German rates followed the US intraday movement, be it from a distance. Net daily changes amount to no more than 1 bps at the front end of the curve. The US dollar strengthened but much of the move faded pretty soon. EUR/USD hit a low of 1.1833 before recovering to 1.187 currently. DXY whipsawed only to trade little changed around 96.88. JPY remains in a sweet spot with solid gains this week so far pushing USD/JPY to 153.8. US stock markets take the upside surprise well and open around 0.5% higher.
News & Views
The Mexican peso and the Canadian dollar in early afternoon trading were captured in some kind of an air pocket. The USD/MXN pair jumped from the 17.13 area to trade near 17.21 going into the US payrolls release. USD/CAD made a similar move rising from low 1.35 area to trade near 1.356 before the payrolls. The moves came after press agency Bloomberg reported, referring to people familiar with the matter, that US president Trump in private discussions raised the idea of exiting the North American trade pact (USMCA) is set for a mandatory review before a possible extension on July 1. Bloomberg also referred to contexts in the office of US trade representative Jamieson Greer, indicating that simply rubberstamping the 2019 terms of the agreement was not in the national interest of the US, suggesting that more profound changes are on the table as the negotiations develop. Both USD/CAD and USD/MXN extended gains after stronger than expected US payrolls (cf supra).
The ECB today published its wage tracker, which covers active collective bargaining agreements up to mid-January. The tracker indicates negotiated wage growth with smoothed one-off payments at 3.2% in 2025 and 2.4% in 2026. For 2026 smoothed indicator was 0.1% higher compared to the December 2025 release. For 2026, the indictor points to 2.1% wage growth in the first half of the year and 2.7% growth in H2, mostly mirroring lager one-off payrolls in the previous years (2024). The ECB in the press release signals that it still sees forward-looking information in line with negotiated wage growth that might off at below 3% by the end of 2026. If realized, these kind of wage growth levels might support the case for the ECB to hold the policy rate near a 2% neutral level.
boldest of expectations as well as broke the downward spiral that originated from last week’s second-tier labour market data. January job growth came in double the 65k expectations. Narrowed down to the private sector, employment even grew 172k. But growth wasn’t particularly broad-based, with a big skew towards health & social assistance sector (+124k). Professional business services came in second (+34k) while transportation & warehouse, IT and financial activities all shed jobs. In contrast, manufacturing (+5k) printed job increases only for the second time in the last two years (the previous occasion being November 2024).){kind=link}