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The US employment data tends to be among the most important economic reports in a given month. After the dismal December jobs report, there is much anticipation for the January reading. Yet, the risk is that today's report proves anti-climactic.

The data will be particularly noisy due to three influences: weather, benchmark revisions, and the loss of emergency unemployment benefits (a three-month extension was rejected by the Senate earlier this week). Moreover, one of the reasons the US jobs data tends to be important is because of the policy reaction function of the Federal Reserve. Before the FOMC meets again, it will see the February jobs report as well. This means that from a policy-making point of view, the January data out today may not be that significant.

The euro had been treading water in Asia and early Europe, but retreated to the lows near $1.3550 in response to unexpected news that the German Constitutional Court has substantial concerns that OMT exceeds the ECB's mandate and has referred the case to European Court of Justice. It will rule on its standing vis-a-vis the German constitution on March 18. The timing and aggressiveness of its stance has taken the market by surprise.

Just yesterday when asked, Draghi reassured investors that the ECB is well within its mandate and this is most likely based on legal advice and the ECB reiterated that view today. There is a sense that the European Court will not risk the stability that OMT appears to have provided, but it does add a new element of uncertainty.

There have been a few other developments to note. First, China's HSBC non-manufacturing PMI slipped to 50.7 from 50.9, with new orders falling for the third consecutive month. This is consistent with the erosion of activity seen in the manufacturing surveys. This did not prevent the Shanghai Composite from moving higher as it re-opened from the Lunar New Year.

Second, the Reserve Bank of Australia's monetary policy statement upgraded both growth and the inflation outlook primarily on the back of the Australian dollar's decline. The neutral tone evident after this week's policy meeting was underscored by today's update. Still, the Aussie could not rise through yesterday's highs near $0.8980.

Third, Germany reported trade and current account figures for December. It was somewhat larger than expected at 18.5 bln euros and 23.5 bln euros, respectively. The mix of exports and imports is worth noting, because it is consistent with some moderation in economic activity at the end of last year. Exports were off 0.9%, whereas the consensus expected a 0.8% gain. Imports fell 0.6%, while the consensus called for a 1.2% rise. IFO was quoted on the news wires suggesting that Germany's current account surplus may be around 7.4% of GDP this year, the largest among high-income countries and well above China's. Germany will be releasing its industrial production figures after this post is made (I am catching a flight back to the US), but after the disappointing factory orders yesterday, the risk is for a disappointment with the output figures today.

Separately, France reported a 5.2 bln euro trade deficit for December. This was larger than expected, even though down from the 5.67 bln euro deficit recorded in November.

Fourth, the UK, Spain, and Sweden reported weaker-than-expected industrial production figures. Industrial output in Sweden fell 1.0%, twice what the consensus expected. It follows an out-sized 5.5% increase in November. The huge 15.4% jump in industrial orders takes the sting out of the disappointment, but has left the krona on the defensive against both the euro and the Norwegian krone.

Spain's industrial production posted a 1.7% rise on year-over-year basis. The consensus was for a 2.4 increase. The November series was revised to 2.4% from 2.6%. The Spanish 2-year yield fell to new record low of 0.88%.

UK industrial production rose 0.4% in December, not the 0.6% the consensus was expecting. Manufacturing output rise 0.3%, half of that the consensus forecast. The November series were revised from flat to -0.1%. The December trade figures contained an even bigger surprise: A considerably smaller deficit than expected. The trade shortfall was GBP1.02 bln, roughly a third of the size the consensus expected and it follows a GBP3.58 bln deficit in November (initially GBP3.24 bln). Sterling remained largely unaffected by the data; slightly higher on the day, recording a new four-day high near $1.6360.

What could be a significant surprise today, Moody's will update its rating for Finland. In late January, the rating agency hinted that its overall performance is more consistent with a rating of Aa1 to Aa3. This would warn of the risk of a loss of its triple-A status.

In addition to the US jobs data, the North American session also features the Canadian employment report. The consensus is for a 20k increase after a nearly 46k decline in December. That December decline was particularly disconcerting because there was a loss of some 60k full-time positions. The US dollar has been flirting with the 20-day moving average against the Canadian dollar, which is found near CAD1.1050. The US dollar has not closed below this average for over a month.

Source: Is It Really All About U.S. Jobs Data Today?