The U.S. Dollar is rallying following the release of Non-Farm Payrolls that revealed a labor sector that seems to be growing more than anticipated.
Overview
Indeed, U.S. payrolls rose by the most since March coming at 256K vs. 165K estimated. Additionally, Unemployment went down slightly from 4.2% vs. 4.1% and Average Hourly Earnings expanded 0.3% meeting the forecast. Naturally, the chances of a interest rate cut happening within the first quarter of the year have dramatically decreased with January odds at 2.7% and for the March 19th meeting at 27.0%.
Markets are embracing the idea that the Fed may not throw much stimulus down the road and equities are slightly down as a result. The Buck is hitting a fresh new high overall per the Bloomberg Dollar Spot Index, not seen since November 2022. Since the data meets the “hawkishness” behind Fed members’ comments this week, next week all eyes will be on inflationary data to gauge just how concerning price-growth dynamics may be along with what appears to be an expanding economy domestically.
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What to Watch This Week…
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GBP ⇓
The Pound has been hammered throughout the week dropping to its weakest point in over a year as doubts continue to grow over the U.K.’s economic stability. A stagnant economy that is experiencing inflation that prevents the Bank of England from cutting borrowing costs more aggressively is looking to only worsen especially if more costs to global trade arrive at any point. Energy costs have gone up, which have only exacerbated the problems suppliers and manufacturers were already facing in terms of affordability and long-term investment. As a result, the bonds market is experiencing a selloff as well as the FTSE 100 Stock Index dropping in value. The financial havoc is similar to the panic that took place in 2022 when then Prime Minister Liz Truss proposed a budget that dissatisfied all market classes.
MXN ⇓
The Mexican Peso has been taking hits all week and is currently down by over half a percent following the U.S. NFPs that signal a Fed less willing to be accommodative. However, there are current political headwinds being faced by new President Claudia Sheinbaum whose approval ratings have started to slip. A 67.0% approval score in October is down to 60.0% in the latest December survey with Mexican constituents explaining they are unhappy with high crime and signs of deepening corruption. With trade also a focus, MXN will remain highly volatile and sensitive to calls for changes to current trade agreements
