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Market Report – 16th October 2023

Increased volatility expected in sterling-based currency pairs.  Key data on UK inflation and unemployment set to be released. Bellwether stock Tesla…



  • Increased volatility expected in sterling-based currency pairs. 
  • Key data on UK inflation and unemployment set to be released.
  • Bellwether stock Tesla due to share its quarterly earnings as investors react to US inflation news. 
  • Netflix, Johnson & Johnson and big US banks due to update investors as earnings season gathers pace.

Last week’s US CPI inflation report jolted investor risk appetite and left major currency pairs trading mid-range between important price levels. The September figures on the US CPI report showed that on a year-on-year basis, the index rose 3.7%, which was the same number as found in the August report. Price inflation may have stalled, but questions remain about how long it might take to return to lower levels and the Fed’s 2% target rate.

With few reasons to suggest that the Fed will be rushing to deviate from its hawkish policy on interest rates, the US dollar had a strong run into the end of the week, which leaves the markets in major currency pairs finely poised. The coming week sees earnings season build momentum with updates due from major corporations. Those could act as a catalyst for further price moves, and traders of sterling-based currency pairs can expect increased levels of price volatility as inflation and unemployment reports are released in the UK.

US Dollar

This week, traders of the US dollar will see the release of a selection of Tier-2 grade economic reports. While none have the same significance as the key CPI and Non-Farm Payrolls statements, they will shed further light on the state of the world’s most important economy. In the background, stock market sentiment can be expected to adjust to the earnings updates that are due to be released by major multinationals. Price moves in major stocks such as Netflix and Tesla have the potential to impact trading behaviour in other asset groups, including the currency markets.

The US Empire State Manufacturing Index report due out on Monday is followed by US retail sales on Tuesday, housing starts on Wednesday, and existing home sales on Thursday. The reports relating to the housing market will be closely followed given the influence that this sector has on the rest of the economy. Analysts are forecasting that existing home sales numbers will fall a not inconsiderable 2.1% on a month-on-month basis, with any deviation from that figure likely to result in price moves in US currency pairs.

Major corporations including Goldman Sachs, Bank of America Corp, Johnson & Johnson, United Airlines and Lockheed Martin all release their quarterly earnings reports on Tuesday. In the run into the end of the week, other household names such as Netflix, Tesla, Procter & Gamble, American Airlines, Alcoa and American Express will open their books for inspection.

US Dollar Basket Index – Daily Price Chart – Mid-Range

us dollar basket index daily price chart mid range oct 16 2023

Source: IG

  • Key number to watch: Thursday 19th October 3:00pm (BST) – US existing home sales (September) – analysts forecast sales volumes to fall 2.1% on a month-on-month basis.
  • Key price levels: Support at 105.46, which marks the intraday price high of Friday 22nd September, and resistance in the region of 106.97, which is the current year-to-date high.


The German ZEW Index report for October will be released on Tuesday, with that number forecast to fall to -16 from 11.4 in the previous month. The absence of any other major eurozone news announcements doesn’t necessarily mean that it will be a quiet week for traders of euro-based currency pairs. Updates from the UK on inflation and unemployment will influence price levels in EURGBP, and earnings season news could trigger price moves in EURUSD.

Daily Price Chart – EURUSD – Daily Price Chart – Support and Resistance

eurusd daily price chart support and resistance oct 16 2023

Source: IG

  • Key number to watch: Tuesday 17th October 10:00am (BST) – German ZEW Index (October).
  • Key price levels: The 20 SMA on the Daily Price Chart continues to guide EURUSD’s downwards price move. Currently in the region of 1.05519, that metric sits mid-range between the support offered by 1.04482, the new year-to-date low printed on Tuesday 3rd October, and resistance in the form of the price high of Thursday 12th October (1.06397).


GDP data out of the UK last week surprised to the upside and triggered a rise in the price of GBPUSD as investors adjusted to the likelihood of the Bank of England keeping interest rates higher for longer. Growth in August was 0.2%, mainly thanks to a strong showing by the service sector, and this week sees UK unemployment numbers (Tuesday) and CPI inflation data (Wednesday) provide more pieces of the jigsaw.

Daily Price Chart – GBPUSD – Daily Price Chart

gbpusd daily price chart oct 16 2023

Source: IG

  • Key number to watch: Wednesday 18th October 7:00am (BST) – UK CPI (September) – analysts predict price growth to be 6.5% year on year, compared to 6.7% year on year in August.
  • Key price level: Resistance in the region of 1.23081, which marks the pivot of the swing-low pattern recorded on 25th May.


Traders of yen-based currency pairs can expect an uptick in volatility as Friday’s Japan CPI inflation report nears. The release of China GDP figures on Wednesday will also likely steer price moves given the close trading relationship between the two countries.

USDJPY – Daily Price Chart

usdjpy daily price chart oct 16 2023

Source: IG

  • Key number to watch: Friday 20th October 12:30am (BST) – Japan CPI (September). CPI expected to be 3.1% year on year down from 3.2% year on year in August.
  • Key price level: 149.16 – Region of the 20 SMA on the Daily Price Chart. This key support level was tested last week, but held firm, which indicates a continuation of the dollar-yen bull run.

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    February Employment Situation

    By Paul Gomme and Peter Rupert The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000…



    By Paul Gomme and Peter Rupert

    The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000 average over the previous 12 months. The payroll data for January and December were revised down by a total of 167,000. The private sector added 223,000 new jobs, the largest gain since May of last year.

    Temporary help services employment continues a steep decline after a sharp post-pandemic rise.

    Average hours of work increased from 34.2 to 34.3. The increase, along with the 223,000 private employment increase led to a hefty increase in total hours of 5.6% at an annualized rate, also the largest increase since May of last year.

    The establishment report, once again, beat “expectations;” the WSJ survey of economists was 198,000. Other than the downward revisions, mentioned above, another bit of negative news was a smallish increase in wage growth, from $34.52 to $34.57.

    The household survey shows that the labor force increased 150,000, a drop in employment of 184,000 and an increase in the number of unemployed persons of 334,000. The labor force participation rate held steady at 62.5, the employment to population ratio decreased from 60.2 to 60.1 and the unemployment rate increased from 3.66 to 3.86. Remember that the unemployment rate is the number of unemployed relative to the labor force (the number employed plus the number unemployed). Consequently, the unemployment rate can go up if the number of unemployed rises holding fixed the labor force, or if the labor force shrinks holding the number unemployed unchanged. An increase in the unemployment rate is not necessarily a bad thing: it may reflect a strong labor market drawing “marginally attached” individuals from outside the labor force. Indeed, there was a 96,000 decline in those workers.

    Earlier in the week, the BLS announced JOLTS (Job Openings and Labor Turnover Survey) data for January. There isn’t much to report here as the job openings changed little at 8.9 million, the number of hires and total separations were little changed at 5.7 million and 5.3 million, respectively.

    As has been the case for the last couple of years, the number of job openings remains higher than the number of unemployed persons.

    Also earlier in the week the BLS announced that productivity increased 3.2% in the 4th quarter with output rising 3.5% and hours of work rising 0.3%.

    The bottom line is that the labor market continues its surprisingly (to some) strong performance, once again proving stronger than many had expected. This strength makes it difficult to justify any interest rate cuts soon, particularly given the recent inflation spike.

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    Mortgage rates fall as labor market normalizes

    Jobless claims show an expanding economy. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.



    Everyone was waiting to see if this week’s jobs report would send mortgage rates higher, which is what happened last month. Instead, the 10-year yield had a muted response after the headline number beat estimates, but we have negative job revisions from previous months. The Federal Reserve’s fear of wage growth spiraling out of control hasn’t materialized for over two years now and the unemployment rate ticked up to 3.9%. For now, we can say the labor market isn’t tight anymore, but it’s also not breaking.

    The key labor data line in this expansion is the weekly jobless claims report. Jobless claims show an expanding economy that has not lost jobs yet. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.

    From the Fed: In the week ended March 2, initial claims for unemployment insurance benefits were flat, at 217,000. The four-week moving average declined slightly by 750, to 212,250

    Below is an explanation of how we got here with the labor market, which all started during COVID-19.

    1. I wrote the COVID-19 recovery model on April 7, 2020, and retired it on Dec. 9, 2020. By that time, the upfront recovery phase was done, and I needed to model out when we would get the jobs lost back.

    2. Early in the labor market recovery, when we saw weaker job reports, I doubled and tripled down on my assertion that job openings would get to 10 million in this recovery. Job openings rose as high as to 12 million and are currently over 9 million. Even with the massive miss on a job report in May 2021, I didn’t waver.

    Currently, the jobs openings, quit percentage and hires data are below pre-COVID-19 levels, which means the labor market isn’t as tight as it once was, and this is why the employment cost index has been slowing data to move along the quits percentage.  


    3. I wrote that we should get back all the jobs lost to COVID-19 by September of 2022. At the time this would be a speedy labor market recovery, and it happened on schedule, too

    Total employment data

    4. This is the key one for right now: If COVID-19 hadn’t happened, we would have between 157 million and 159 million jobs today, which would have been in line with the job growth rate in February 2020. Today, we are at 157,808,000. This is important because job growth should be cooling down now. We are more in line with where the labor market should be when averaging 140K-165K monthly. So for now, the fact that we aren’t trending between 140K-165K means we still have a bit more recovery kick left before we get down to those levels. 

    From BLS: Total nonfarm payroll employment rose by 275,000 in February, and the unemployment rate increased to 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, in government, in food services and drinking places, in social assistance, and in transportation and warehousing.

    Here are the jobs that were created and lost in the previous month:


    In this jobs report, the unemployment rate for education levels looks like this:

    • Less than a high school diploma: 6.1%
    • High school graduate and no college: 4.2%
    • Some college or associate degree: 3.1%
    • Bachelor’s degree or higher: 2.2%

    Today’s report has continued the trend of the labor data beating my expectations, only because I am looking for the jobs data to slow down to a level of 140K-165K, which hasn’t happened yet. I wouldn’t categorize the labor market as being tight anymore because of the quits ratio and the hires data in the job openings report. This also shows itself in the employment cost index as well. These are key data lines for the Fed and the reason we are going to see three rate cuts this year.

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    Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

    Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

    Last month we though that the January…



    Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

    Last month we though that the January jobs report was the "most ridiculous in recent history" but, boy, were we wrong because this morning the Biden department of goalseeked propaganda (aka BLS) published the February jobs report, and holy crap was that something else. Even Goebbels would blush. 

    What happened? Let's take a closer look.

    On the surface, it was (almost) another blockbuster jobs report, certainly one which nobody expected, or rather just one bank out of 76 expected. Starting at the top, the BLS reported that in February the US unexpectedly added 275K jobs, with just one research analyst (from Dai-Ichi Research) expecting a higher number.

    Some context: after last month's record 4-sigma beat, today's print was "only" 3 sigma higher than estimates. Needless to say, two multiple sigma beats in a row used to only happen in the USSR... and now in the US, apparently.

    Before we go any further, a quick note on what last month we said was "the most ridiculous jobs report in recent history": it appears the BLS read our comments and decided to stop beclowing itself. It did that by slashing last month's ridiculous print by over a third, and revising what was originally reported as a massive 353K beat to just 229K,  a 124K revision, which was the biggest one-month negative revision in two years!

    Of course, that does not mean that this month's jobs print won't be revised lower: it will be, and not just that month but every other month until the November election because that's the only tool left in the Biden admin's box: pretend the economic and jobs are strong, then revise them sharply lower the next month, something we pointed out first last summer and which has not failed to disappoint once.

    To be fair, not every aspect of the jobs report was stellar (after all, the BLS had to give it some vague credibility). Take the unemployment rate, after flatlining between 3.4% and 3.8% for two years - and thus denying expectations from Sahm's Rule that a recession may have already started - in February the unemployment rate unexpectedly jumped to 3.9%, the highest since February 2022 (with Black unemployment spiking by 0.3% to 5.6%, an indicator which the Biden admin will quickly slam as widespread economic racism or something).

    And then there were average hourly earnings, which after surging 0.6% MoM in January (since revised to 0.5%) and spooking markets that wage growth is so hot, the Fed will have no choice but to delay cuts, in February the number tumbled to just 0.1%, the lowest in two years...

    ... for one simple reason: last month's average wage surge had nothing to do with actual wages, and everything to do with the BLS estimate of hours worked (which is the denominator in the average wage calculation) which last month tumbled to just 34.1 (we were led to believe) the lowest since the covid pandemic...

    ... but has since been revised higher while the February print rose even more, to 34.3, hence why the latest average wage data was once again a product not of wages going up, but of how long Americans worked in any weekly period, in this case higher from 34.1 to 34.3, an increase which has a major impact on the average calculation.

    While the above data points were examples of some latent weakness in the latest report, perhaps meant to give it a sheen of veracity, it was everything else in the report that was a problem starting with the BLS's latest choice of seasonal adjustments (after last month's wholesale revision), which have gone from merely laughable to full clownshow, as the following comparison between the monthly change in BLS and ADP payrolls shows. The trend is clear: the Biden admin numbers are now clearly rising even as the impartial ADP (which directly logs employment numbers at the company level and is far more accurate), shows an accelerating slowdown.

    But it's more than just the Biden admin hanging its "success" on seasonal adjustments: when one digs deeper inside the jobs report, all sorts of ugly things emerge... such as the growing unprecedented divergence between the Establishment (payrolls) survey and much more accurate Household (actual employment) survey. To wit, while in January the BLS claims 275K payrolls were added, the Household survey found that the number of actually employed workers dropped for the third straight month (and 4 in the past 5), this time by 184K (from 161.152K to 160.968K).

    This means that while the Payrolls series hits new all time highs every month since December 2020 (when according to the BLS the US had its last month of payrolls losses), the level of Employment has not budged in the past year. Worse, as shown in the chart below, such a gaping divergence has opened between the two series in the past 4 years, that the number of Employed workers would need to soar by 9 million (!) to catch up to what Payrolls claims is the employment situation.

    There's more: shifting from a quantitative to a qualitative assessment, reveals just how ugly the composition of "new jobs" has been. Consider this: the BLS reports that in February 2024, the US had 132.9 million full-time jobs and 27.9 million part-time jobs. Well, that's great... until you look back one year and find that in February 2023 the US had 133.2 million full-time jobs, or more than it does one year later! And yes, all the job growth since then has been in part-time jobs, which have increased by 921K since February 2023 (from 27.020 million to 27.941 million).

    Here is a summary of the labor composition in the past year: all the new jobs have been part-time jobs!

    But wait there's even more, because now that the primary season is over and we enter the heart of election season and political talking points will be thrown around left and right, especially in the context of the immigration crisis created intentionally by the Biden administration which is hoping to import millions of new Democratic voters (maybe the US can hold the presidential election in Honduras or Guatemala, after all it is their citizens that will be illegally casting the key votes in November), what we find is that in February, the number of native-born workers tumbled again, sliding by a massive 560K to just 129.807 million. Add to this the December data, and we get a near-record 2.4 million plunge in native-born workers in just the past 3 months (only the covid crash was worse)!

    The offset? A record 1.2 million foreign-born (read immigrants, both legal and illegal but mostly illegal) workers added in February!

    Said otherwise, not only has all job creation in the past 6 years has been exclusively for foreign-born workers...

    Source: St Louis Fed FRED Native Born and Foreign Born

    ... but there has been zero job-creation for native born workers since June 2018!

    This is a huge issue - especially at a time of an illegal alien flood at the southwest border...

    ... and is about to become a huge political scandal, because once the inevitable recession finally hits, there will be millions of furious unemployed Americans demanding a more accurate explanation for what happened - i.e., the illegal immigration floodgates that were opened by the Biden admin.

    Which is also why Biden's handlers will do everything in their power to insure there is no official recession before November... and why after the election is over, all economic hell will finally break loose. Until then, however, expect the jobs numbers to get even more ridiculous.

    Tyler Durden Fri, 03/08/2024 - 13:30

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