Daily Market Update

Return of the Buck after stellar labor data

February 02, 2024

The U.S. Dollar is trading in stronger ranges, rallying following the release of the Employment Situation.

Overview

U.S. Non-Farm Payrolls shocked markets with a print of 353K added jobs when only 185K was expected. Furthermore, December’s 216K jobs number was upwardly revised to 333K. The Unemployment Rate stayed at 3.7% while Average Hourly Earnings jumped by double the estimate for the month at 0.6% versus 0.3%. Overall, most currency pairs fell by half a percent on average thus far. The Michigan University survey on Consumer Sentiment will be out at 10 AM.

The data closes a week of confidence from the Fed in leaving things untouched, and with a labor sector being more than just steady, there is little reason on the horizon to believe any dovish action, any interest rate cuts, will arrive within the first two quarters. The impact has been immediate on expectations. The odds of a cut to arrive at the March 20th FOMC meeting are now at 23.0%. We shall see how markets take it all in and readjust their plans going forward since it looks like the environment is as accommodative as it will be for the next few months and beyond.

What to Watch Today…

EUR  ⇓

The Euro is trading at its weakest point since mid-December, dropping whatever it had recovered after impressive economic indicators from the U.S. As data paints quite a contrast with the European situation, it is natural for the Buck to be on the rise. We will see on Monday if the January Purchasing Managers Index demonstrates a better state of affairs than economists believe, along with the Producer Price Index from December. For now, the pressure on the shared currency makes sense. It will take market risk appetite to get a resurgence.

JPY ⇓

The Japanese Yen fell overnight after having its worst trading daily performance in two weeks. Overall, January marked a major downfall for the Yen after dropping 3.3% in value, the most among the majors for the month against the buck. Following a natural disaster to start off 2024 and ongoing anemic economic progress, it looks like officials from the Bank of Japan are disappointing investors hoping for central bank tightening. The BOJ will not be meeting again until March 19th, when chances of rate increase stand at just 19.0%.

 

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