Highlights from TD Global Daily - TD Securities

TD Securities - Global  Daily Report Key Highlights:

• Expectations for US data:
  • 175k jobs from NFP
    • but expects wages to drive market response
  • 4.00% Unemployment
  • 0.20% Avg. Hourly Earnings
    • minimum wage hikes offset by 'unfavourable calendar effects'
• Treasury yields consolidated at high levels after a very weak US session (10yr opened 7bp higher, driven
  almost entirely by a rise in real yields). The key focus tonight is January payrolls, where we see a risk of a
  weaker wage print pushing yields lower following that selloff.
• The first day of February was marked by USD weakness but the Asian session today saw a solid floor put
  under DXY at 88.55. Focus turns to US payrolls, where a disappointment in wages could easily see a swift
  return to USD weakness.
• Gold prices paused today, consistent with our view that the yellow metal's stellar run appears overdone. We
  expect this near-term consolidation to continue.
• Notes for today:
  • GBP January construction PMI is expected by the market to be little changed
    at 52.0 vs 52.2. In spite of the downside miss for the Manufacturing PMI in
    January, we see some mild upside to the Construction PMI and look for it to
    rise slightly to 52.4, mostly as give-back for some unusual weakness the last
    few months.
  • EUR The ECB’s Coeuré gives a speech at a conference in Slovenia at 10am
    London time. HE is likely to repeat the calls for patience on QE and limited
    concerns on upside inflation risks from his comments just a few days ago.
  • USD We expect January nonfarm payrolls to advance by a respectable 175k
    (below consensus: 180k) and for the unemployment rate to slip to 4.0%
    (consensus expects a stable read of 4.1%). Markets will likely focus more
    on average hourly earnings, which we expect to rise 0.2% m/m, 2.5% y/y
    (consensus: 0.2% m/m, 2.6% y/y). Moreover, we see risks skewed to the
    downside despite the minimum wage hikes and corporate pay raises. Note
    that the report will contain the annual payroll revisions. Final UMich consumer
    sentiment for January is released later and is expected by the market to
    revise higher to 95.0 from 94.4. Revisions to long-term inflation expectations
    (2.5%) will be eyed as well. Finally, December factory orders are expected
    to rise 1.5%, which reflects a 2.9% increase in durable goods orders. Fed
    President Kaplan (non-voter) is speaking at 13:30 ET while Fed President
    Williams (voter) gives a speech at 15:30.
• New Bloomberg RBA poll says median is for no hike this year, but is
  a little misleading. Out of 22 respondents, 1 for cuts to 1%, another 10/22
  for on hold at 1.50%, 4 for +25bp to 1.75% and the remaining 7 looking for
  +50bp this year to 2%, so the tail is actually hawkish.