Market News & Analysis
Why US Economic Data for December may not Matter
Joe Perry January 8, 2020 4:53 AM
Last Friday, we received the ISM Manufacturing PMI data for December which came out lower than expected: 47.2 actual vs and expectation of 49.0. This Friday we will get Non-Farm Payroll data from December. Expectations are that 164,000 jobs have been created in the US in December vs 266,000 in November, which was a huge beat. Throughout the month of January, monthly data for December will be released, just as it normally would any other month. This data includes more manufacturing data, more employment data, inflation data, and our first look at GDP for Q4. The month concludes with an unenthusiastic Fed Interest Rate Decision on January 29th. According to the CME FedWatch Tool, the market is pricing in a 91% chance of a “no change” decision on interest rates.
But will the December data matter to the markets when it is released? You may recall something agreed to in mid-December call “Phase One” of a Trade Deal that has been agreed to between the United States and China. As a matter of fact, there is talk that the deal will be signed next week in Washington. In addition, around the same time, a trade agreement was reached among the counties of North America, known as the USMCA (the United States-Mexico-Canada Agreement). Mexico has already ratified the agreement, the US may have the final Senate vote on the bill on Friday, and Canada is expected to vote later this month. However, with an “agreement” in place for both trade deals, one would expect the wheels to be put in motion sooner than later.
The “markets” tends to be forward looking. Traders will be very interested to see what the effects will be on the economic data once these trade deals are all signed and done. Supposedly, these deals are better than previous deals. This may be one reason the S&P 500 is near all-time highs.
Source: Tradingview, City Index
So, if the market is forward looking and the trade deals were agreed in mid-December, why would traders care about the economic data from December, before any of the trade deal effects would be reflected in the data? We may see a pickup in volatility in the “markets” in January, however just don’t expect too much of it to come from the US economic data until later in Q1.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.