The year kicked off with a significant appreciation of the U.S. dollar, despite the lack of pivotal data that could have markedly influenced perceptions of the Federal Reserve’s future monetary policy. While U.S. stock indices attempted to recover losses incurred at the end of last year, they ultimately ended the day in the red, moving further away from historical highs. Meanwhile, oil prices continued their upward trajectory, marking the fourth consecutive day of gains.
Today, the market will see the release of the ISM manufacturing report, though its potential to spark major market movements is expected to be limited. Investors are primarily focused on labor market data, with the key figures set to be unveiled in a week. Yesterday’s decline in jobless claims to 211,000 highlighted a stable situation, reinforcing the case for the Fed to hold off on a rate cut in January.
The upcoming Non-Farm Payrolls (NFP) report, scheduled for release in exactly seven days, will be a focal point for investors. Over the past two months, the U.S. labor market has been significantly influenced by extraordinary factors, including hurricanes and strikes (notably at Boeing). These events resulted in a drop in employment growth to 36,000 in October, followed by a rebound to 227,000. A more reliable indicator seems to be the average of these two months, which stands slightly above 130,000. December is expected to show an increase of 153,000 jobs and a stable unemployment rate of 4.2%. In the longer term, signs of a slowdown are evident, with a decline in job openings and an increase in the proportion of unemployed individuals. Additionally, more unemployed workers perceive their job loss as permanent rather than temporary. The median wage growth, as measured by the Atlanta Fed, is also decreasing.
Consumer spending remains robust, indicating that an economic downturn is still a distant possibility, and it may not occur at all. If the labor market data aligns with expectations, the Fed is unlikely to further ease monetary policy, mindful of potential inflationary pressures stemming from Donald Trump’s planned economic policy changes.
EUR/USD Approaches Technical Support
The EUR/USD exchange rate has approached technical support at 1.02, marking its lowest point in over two years. The pair has decisively moved out of the broad consolidation range it had been in for months. Achieving parity now seems within reach, and this level might trigger a more substantial upward correction for the primary currency pair.
Author: Łukasz Zembik, Oanda TMS Brokers
Source: ceo.com.pl
