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Is 6.5 a magic number?

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  • The US labour market report will be subject to some weather distortions, which will broaden the range of interpretation around any number that comes out. We are positive at 165,000 for payrolls and a decline in unemployment to 6.5%.
  • The lower unemployment rate may feed the debate about how much spare capacity exists in the US economy (or, 'where is the natural rate of unemployment?') allowing for the fact that employment participation can still increase which is an form of spare capacity.
  • EU and US sanctions applied over the Ukrainian situation are not of a scale that are likely to cause markets a great deal of concern (the economic consequences are still limited), but the possibility of an escalation in sanctions will still be monitored.
  • Euro area data is relatively uninteresting, allowing markets to continue to digest the comments from the ECB's Draghi yesterday. The less dovish remarks were not a major surprise to the economic consensus - but market speculation around ECB policy is likely to continue with a further deceleration of CPI in March.
 
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