EU MORNING: Waiting For NFPs

*NFPs primed for strong read after mid-week wins
*BoE Carney confuses Sterling outlook
*Aussie Retail Sales upside surprise but with caveat
*Equities can't stop, won't stop

Non-farm payrolls, another big one?

The main highlight of the session in Non-farm Payrolls is set to spark some late-week volatility and waves after a relatively slow Asia session. Consensus forecasts poll a print of 164k, but this very well could be on the low side if data seen mid-week is anything to go by.

Taking signal from solid beats across ISM Non-mfg PMI and ADP employment, precursors of sorts, it largely feels like markets are foreshadowing a strong result here. While it definitely helps, I'd still caution attributing necessary association between outperformance in these points and better-than-expected NFPs, with some looseness seen between them in the past. 

In summary, another big result here, coupled with the momentum drawn from the prior two months which saw exceptional results, only emboldens the US growth story and strengthens the argument that investors will lean USD positive throughout the rest of 2020.

Sterling whips on Carney dovishness

As if the outlook for Sterling couldn't get any more interesting - BoE Gov. Carney offered remarks that suggest near-term stimulus (a combination of both rate cuts and unconventional policy) is being debated, and that there's 250 basis points of policy space to "reinforce the expected recovery in UK growth and inflation". GBPUSD immediately plummeted 100pips on Carney's speech but has since crept higher after a more settled Asia session, and PM Johnson's withdrawal agreement passed through parliament as expected.

Attention now turns to UK Flash Manufacturing PMIs due out on Jan 24 as a key variable into the BoE's first meeting for 2020 later in the month. While market pricing is yet to materially reflect any substantial likelihood that the BoE will cut in January, investors would be remiss to forget there were two dovish dissenters during last month's vote when expectations largely pointed to the MPC to remain unanimous for no rate cuts.

Aussie Retail Sales impress

AUD made waves as December retail sales exceeded expectations. Consensus polls initially forecasted a m/m gain of 0.4% but were pleasantly surprised as 0.9% hit the wires. This led AUDUSD immediately higher by 15pips, before those privy to the methodology recognised the difficulties of making a seasonal-adjustment to recent years of "Black Friday" sales. Despite the caution, AUDUSD manages to string together a 0.32% gain on the day, edging towards 0.69.

What missile attack? 

Distressing vision of a missile attack on downed Ukrainian airliner has failed to escalate geopolitical risk premiums across risk assets. Equities resurgence from Wednesday lows appears to be keeping on, with major US benchmarks higher overnight led by rallies in Microsoft (MSFT) and Apple (AAPL). ASX 200 came to the party as Asia opened following Wall Street by climbing to all-time highs itself.

Ultimately, the familiar game plan employed by Trump to sew chaos and then de-escalate - a hero syndrome of sorts - seems to be working to great effect, as S&P 500Nasdaq and ASX 200 sustain at rich levels, and Crude and Gold shed earlier-in-the-week risk-off flows.