North American Summary and Highlights 5 Jan

North American session
The USD had a choppy North American session. It initially gained some ground on the US employment report which as mildly on the strong side of expectations, but failed to hold onto gains, and fell sharply after the ISM services sector data, which came in on the weak side of expectations. However, those sharp losses were largely corrected by the end of the session. Overall the USD was marginally weaker. GBP and AUD led the way. EUR/USD gains were more modest, stalling as 1.10 approached. USD/JPY and USD/CAD saw little net change.
December’s non-farm payroll increase of 216k, 164k private, was on the firm side of consensus but the upside surprise was more than offset by 71k in net downward revisions, mostly in October. Unemployment, unchanged at 3.7%, was lower than expected and average hourly earnings at +0.4% were stronger than expected, but a fall in the workweek hints at economic slowing.
December’s ISM services index of 50.6 from 52.7 is significantly weaker than expected with weakness particularly pronounced in employment, which at 43.3 from 50.7 presents a very different picture from the non-farm payroll, and is likely to be understated.
Canadian employment was almost unchanged in December, weaker than expected, but wage growth accelerated significantly, to 5.7% yr/yr from 5.0%.

European morning session
The USD continued to gain ground through the European morning, edging higher across the board ahead of the US employment report, helped by generally rising yields. EUR/USD lost around 20 pips to 1.0910, while USD/JPY only gained marginally to 145.20. There were similar modest gains against other currencies. 
German retail sales early in the session were much weaker than expected in November, falling 2.4% m/m, but there was little immediate impact. This data is volatile and the underlying trend remains steady, albeit clearly weak. Eurozone CPI came in slightly below expectations, with the headline rising to 2.9% y/y in December from 2.4% in November, but the core continuing to edge lower, to 3.4% from 3.6%.