What to watch

The overnight session was a little volatile with core fixed income a little higher, while EURUSD has moved to its lowest level since Tuesday. There is a heavy day data calendar today with the highlight being the US employment report.

• The consensus expects payrolls to come in at 550k with most estimates in a 450-650k range, and a slight skew to the downside. The participation rate is expected to tick a little higher while the headline unemployment rate falls a tenth. There is probably two way risks for markets on today's print. Markets had largely been pricing a faster taper prior to Thanksgiving and the emergence of the Omicron variant before dismissing expectations of a faster taper. Some of these expectations were brought back to the table by Powell and subsequent FOMC speakers but the decision still looks as though it could be swayed either way by data - and hence today's employment report will be closely watched.
• Outside the US employment report we have final European/UK PMI data this morning. This is unlikely to cause large market moves (given that it is final prints of survey data largely collected pre-Omicron), but it may well help set sentiment this morning. Later in the day we will also receive US factory orders, final prints of durable goods and the ISM services.
• In terms of speeches today, BOE's Saunders speaks on "The Outlook for Monetary Policy" at 11:00GMT. Saunders is of course one of the most hawkish members of the MPC having been the first MPC member to vote to end QE early and having voted for a hike at the November meeting. His comments are expected to remain hawkish, but it will be interesting if he seems less confident of the outlook given the Omicron variant. If Saunders was no longer hawkish, a BOE hike would seem a much more distant possibility.