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FTSE soft, USD recovers pre-NFP
FTSE stocks declined for the third consecutive session, as financials (+0.12%) and industrials (+0.68%) outperformed at the London open.

Lloyds (+1.45%) led gains in London, amid being upgraded to overweight by Barclays.

Mining and energy stocks are offered, as the recovery in the US dollar weighs on oil and commodity prices.

Glencore (-1.25% , Rio Tinto (-1.21%)

The appetite in the pound remains limited. The 50-day moving average (1.2450) is acting as a solid resistance. The GBPUSD missed the opportunity to surf on solid economic data this week. The sentiment remains sluggish under the Brexit shadow.

Soft US jobs data not a big deal as Donald Trump brings hope

The US dollar pared losses against all G10 currencies after being sold aggressively on disappointing ADP data yesterday.

Initial jobless claims retreated to 235K over the last week, versus 262K expected and 263K printed a week earlier. ISM non-manufacturing stayed steady at 57.2 versus the consensus of 56.6. The final services PMI showed an expansion in the US’ services sector in December. Mixed data discouraged the Fed hawks, giving less meaning to the Federal Reserve (Fed) meeting minutes released earlier this week, revealing concerns about faster growth and inflation that could require a steeper rate normalization path in 2017.

The US labour data will be in focus today. According to analysts, the US economy is expected to have added 178’000 new non-farm jobs in December, slightly higher than a month earlier, yet still below the 12-month average of 193’000. If this is the case, the average monthly NFP change in 2016 will decline to 190’000, versus 222’000 in 2015. The unemployment rate could have deteriorated to 4.7% at the end of 2016, from 4.6% in November.

Any disappointment could hand the US dollar back to the bears, although perhaps not for long. US President-elect Donald Trump is forcefully fighting to bring jobs back to the US. He has already taken credit for saving 1000 jobs at Carrier, bringing back 5000 jobs at Sprint, America’s fourth largest network operator and creating 3000 more jobs at the US satellite company, OneWeb. Ford stepped back from $1.6 billion worth of expansion in Mexico and redirected investment to Michigan. Similar actions are on the agenda and will certainly be reflected in the US jobs data in the short-term. Concrete action and growing hope for more US jobs could wipe away any short-term disappointment in the data at this stage.

However, the Trump-rally in the US equity markets is fading, as any disappointment triggers an overreaction either on the up or the downside. High volatility is sign of stress. The Dow Jones sold off aggressively to $19808 in New York yesterday; the S&P 500 stocks retreated shortly below $2260.

The Dow Jones is called 14 points lower at 19885 at the US open; the S&P500 is seen 2 points softer at $2267.

Australia prints the first trade surplus since May 2014

The Aussie slid 0.20% in Sydney despite printing an unexpected trade surplus of AUD$ 1.24 billion in November versus -055bn expected and -1.12bn in October. Australia printed a trade surplus for the first time since May 2014. The AUDUSD retreated to 0.7314, a touch higher than 0.7311 (minor 23.6% retracement on Jan 2nd to Jan 5th recovery). Solid trade data revived the AUD-bulls, as improved trade terms are what the Reserve Bank of Australia (RBA) needs to stay firm on its monetary policy stance. The key short-term support stands at 0.7283 (major 38.2% retrace), however if broken, could send the pair into the short-term bearish consolidation zone and encourage a further slide towards the 0.7200 mark.

China preparing for trade war

China is preparing for a potential trade war with the US. News that President-elect Donald Trump would raise the Chinese import tax up to 45% has not been welcomed by the world’s most populated nation. According to Bloomberg news, China prepares to fight back by subjecting US multinationals and companies that have large operations in China to similar constraints.

These are clearly big steps towards the dismantling of decades long efforts to build relationships and could cause sizeable financial damages if not avoided immediately.

According to a recent Bloomberg research, a 45% increase in Chinese imports by the US could cause a 60% to 70% drop in China’s exports to the US.

Shanghai’s Composite (-0.15%) and Hang Seng (+0.20%) were mixed before the weekly closing bell.

Yen bid into the 105 level

Nikkei (-0.34%) and Topix (-0.15%) were offered in Tokyo, as the USDJPY plunged to 115.07 for the first time since December 13th. The pair quickly rebounded past 116.00 mark, hinting at solid dip-buying interest pre-115.00. The key support stands at 114.56 (major 38.2% retracement on Nov 9th to Dec 14th post-Trump rise).