After opening 2024 with its best trading day since March, the United States Dollar is once again on the front foot this morning ahead of the release of the minutes from the Federal Reserve’s most recent meeting last month.
Overview
Data releases in the new year finally begin to pick up steam today, with ISM manufacturing data and JOLTS job openings due out as well. It appears, in this very young year, that the major theme markets are and will be watching is interest rates. Yesterday’s big USD gain was due at least in part to a repricing of expectations that the Fed may cut interest rates as soon as March.
To that end, Fed Governor Barkin spoke this morning about his economic outlook for 2024 and offered further pushback on expectations of early cuts from the central bank. He highlighted that there is still a small chance that the Fed could decide that yet another hike is necessary rather than a full pivot toward easing, however unlikely that may be. “Conditions are ever-evolving,” he stated this morning, and “so too will our approach. So, buckle up. That’s the proper safety protocol, even if you expect a soft landing.”
Realistically, it would be fairly difficult for the Fed minutes to ring more dovish than Powell himself presented in his press conference in December. As many governors have since pushed back on cut expectations, we could see some dissent in the ranks emerge with today’s release. Then, still to come later this week are employment numbers for the month of December, due out Friday morning. All told, after a risk rally to close out 2023, 2024’s big moves so far are almost entirely risk-off.
What to Watch Today…
- US ISM Manufacturing Index, Wednesday 10 AM
- JOLTS Job Openings, Wednesday 8:30 AM
- Eurozone Composite PMI Index, Thursday
- US Nonfarm Payrolls, Friday 8:30 AM
- Monex USA Online is always open.
EUR ⇓
The single currency this morning continued its slide off of last week’s annualized highs after German unemployment rose in the month of December. Though the EUR is definitely a victim of the strong Dollar to open this year and is being sold off as traders de-risk, the macro picture there also presents its own set of warning signs. German and French CPI releases are due out tomorrow morning, as well as Eurozone services and composite PMI readings.
GBP ⇑
Pound Sterling this morning is the only currency this morning with even a minute gain against the Dollar, even as business confidence in the UK sank this morning to a four-month low. The UK’s inflation problem continues to appear to be worse and more entrenched than that of many other nations, prompting traders to view the Bank of England as the last of the major central banks to institute rate cuts later this year. Whether the larger economy can withstand an extended hold, however, remains to be seen.
