US non-farm payrolls due today

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Yesterday's central bank decisions from the Bank of England and European Central Bank threw up surprises galore for very different reasons. The Bank of England's decision to push ahead with further quantitative easing (QE), £75 billion to be precise, as the UK and global economy face another slowdown, came as some what of a surprise.

Indeed, it was the slowdown in the global economy and problems in the Eurozone that seemed to worry the Bank of England the most. The expansion of quantitative easing begins next week and should take 4 months to complete with more QE a distinct possibility once this round of QE is completed.

As for the European Central Bank, medium and long term liquidity measures and covered bond purchases were their response which should help the beleaguered banking sector (and allow them to plan for corporate lending with greater certainty). However, they did not cut interest rates but recognised that risks to the downside on growth were increasing. The ECB have therefore left themselves room for manoeuvre on interest rate cuts, room that they are likely to need in the months ahead.

Sterling fared quite well considering £75 billion being pumped into the UK economy by the Bank of England. Initially Sterling dropped a cent and a half against the Euro, two cents against the US Dollar and three cents against both the Australian Dollar and New Zealand Dollar. This morning Sterling has recovered against the Euro and is up against the US Dollar compared to levels before the Bank of England's announcement.

Today, US non-farm payrolls for September will be closely watched. Some signals from jobless claims and the ADP survey point to a better than consensus net payrolls gain, possibly by as much as 70,000. Employment data released prior to the non-farm payrolls should be treated with some scepticism though given initial jobless claims and the ADP's poor correlation with non-farm payrolls.

Over the last few months the payrolls data has been disappointing, showing little growth in employment even when economic activity was more robust. As activity has subsequently slowed, the negative pressure on payrolls has increased. 

Elsewhere the data calendar features UK September producer prices and German August industrial production, ahead of publication of the all-important US September employment report at 13:30 BST.