HomeContributorsFundamental AnalysisEuro Edges Higher As Markets Digest Mixed US Jobs Data

Euro Edges Higher As Markets Digest Mixed US Jobs Data

The euro has ticked higher to start the week. In the Monday session, EUR/USD is trading at 1.1794, up 0.20% on the day. On the release front, there are no major eurozone events. The US will release JOLTS Job Openings, which is expected to drop to 6.03 million. On Tuesday, we’ll get a look at ZEW Economic Sentiment reports out of Germany and the eurozone, and ECB President Mario Draghi will speak at an event in Frankfurt. The US will release PPI, an important inflation indicator.

There was positive news for Prime Minister Theresa May on Friday, as EU Commissioner Jean-Claude Juncker announced that sufficient progress had been made on non-trade issues in the Brexit talks. The announcement came as May was able to get both the Irish government and the DUP party on board, after she promised both that Northern Ireland would not have any hard borders after Brexit. This breakthrough means that Britain and Europe can now move to Phase II and discuss trade relations. With Britain scheduled to leave the EU in March 2019, time is of the essence. What will a new trade relationship look like? On Sunday, Brexit minister David Davis said he envisions a comprehensive trade deal with Europe, which would be signed just after Britain leaves the bloc. The EU recently signed a free-trade treaty with Canada, and Davis said that he wants an agreement “Canada plus plus plus”, meaning that the deep trading ties between the sides and access to European markets would remain intact.

The markets continue to digest Friday’s US employment numbers, which were a mix. Nonfarm Employment Change softened in November, but the reading of 228 thousand easily beat the estimate of 198 thousand. However, Average Hourly Earnings, which measures wage growth, came in at 0.2%, shy of the estimate of 0.3%. Analysts remain stumped as to why wages remain stubbornly low, given a red-hot labor market which is running at full capacity. On an annual basis, wages rose 2.5%, short of the forecast of 2.7%. The Fed is also concerned with the lack of wage growth, and this could have a significant effect on monetary policy – if wage growth and inflation shows improvement in 2018, the Fed could raise rates up to three times in 2018.

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