Market Analytics and Considerations
Key Notes
- Future US interest rates are a topic of disagreement between the Fed and the marketplace.
- The importance of the NFP report on Friday has increased.
Notwithstanding the US central bank’s repeated assertion indicating they anticipate US interest rates would remain elevated for extended, the US dollar has barely improved since the FOMC results were released. According to the notes of the Meeting in December, the job market “soothed considerably throughout October and November but stayed incredibly tight” whereas the CPI “remain elevated but had moderated in recent months.” A strong labor market, where higher salaries are frequently required to lure new workers, doesn’t really help the difficulty of keeping rates are higher enough even for prolonged enough to drive inflation down to aim while leading the economy towards a gentle landing.
According to the JOLTs data released on Wednesday, job opportunities remained stable at over 10.5 million in November while job terminations increased slightly to 4.173 million from 4.047 million. Given that the US central bank is now paying more attention to the employment market, the monthly US jobs report (NFP) has gained in significance.
Despite differences seen between market and also the Fed regarding the direction of US interest rates, short-dated US Treasury yields remained range bound following the release of the FOMC conclusions. The Fed differs with both the market and predicts a rate reduction at the end of the year, while the market predicts a lower terminal rate than what is currently being provided in the futures market. The US Treasury traders will be busier in the upcoming months as a result of this disagreement.
USD Takeaway
Going into Friday’s jobs data, the US dollar is still in the center of a multi-week band among 103.40 to 105.10. The DXY is fighting against with the 20-day moving average on the graph, and a negative death crossing, or perhaps a 50-/200-day cutover, is expected to occur this week. If this prior range is to be breached, the market forecasts of 200k new openings must be significantly different from the NFP announcement on Friday.
