Yesterday’s macroeconomic calendar was slim. From the US, we received only the Dallas Fed’s regional index for the manufacturing sector, which performed very weakly. Wall Street indices had a successful session, and the tech-heavy Nasdaq Composite boasted a return of +1.1 percent. Yields on US government bonds fell. The dollar gained in the first part of the day, but declined later on. The EUR/USD rate momentarily crossed the 1.08 threshold before rebounding to 1.0840. The market is awaiting tomorrow’s FOMC meeting. Attention today will be focused on the JOLTS report, which will provide data on job demands and employee turnover—expectations indicate another cooldown.
Many G10 central banks have scheduled their first meeting of the year this week. Tomorrow’s Federal Open Market Committee (FOMC) meeting is certainly the most important among them. After dovish comments from Fed Chairman Jerome Powell at the press conference following the last meeting, market participants will likely be seeking more precise information regarding the timing of the first interest rate cut.
Today, the US will release data from the real estate market and the Conference Board index, but attention will mostly be focused on labor market data, specifically the JOLTS report (Job Openings and Labor Turnover Survey). Apart from falling inflation, the Fed would like to see significant cooling in the labor market, so any hints ahead of the meeting will be heavily interpreted and priced into the market. Today’s publication will provide information on job demand and employee turnover. The JOLTS report shows the number of unfilled positions. Therefore, lower numbers than forecasts should strengthen speculation about faster than further rate cuts. The indicator has been consistently falling after hitting a maximum value of around 12 million at the beginning of 2022. Since then, there has been a clear downward trend, but the values have not yet returned to pre-pandemic levels. The last reading showed 8.79 million and expectations point to a slight decline to 8.75 million.
Yesterday, the main currency pair was able to break down through the lower bound of the short-term consolidation and momentarily indicate a level below 1.08. The downward trend that began in late December 2023 is evidently not over yet. From a technical standpoint, yesterday’s losses opened the way towards the next level of 1.0740-1.0730—these are the lows from early December and the highs from early November. The euro is still weak after recent comments from Lagarde. If US data remains solid, declines may continue.
Łukasz Zembik, Oanda TMS Brokers.
