FX daily: US employment continues on a benign trend?
==========
The focus in FX markets today is on whether US employment continues on its benign downward path and represents the economy coming into ‘better balance’. Of interest will be whether December’s number gets revised down – marking 11 downward revisions out of 12 last year. We could see the return of a marginally more pro-risk environment. This week’s price action in US rates markets is instructive. Despite the Federal Reserve pushing back against prospects of a March cut, interest rates have still come lower. That may be a function of investors watching US regional banks remain under pressure. Or more likely it reflects a conviction call that policy rates are coming lower this year and there is no point fighting this overwhelming trend. This is the reason that the dollar did not build on gains seen early yesterday. Coming to today, we have the US January jobs report. Consensus is for +185k in jobs gains, while we forecast +200k. However, the Fed seems pretty comfortable that the labour market is coming into better balance and we doubt a +200k number needs to trigger a major repricing of the Fed easing cycle. Instead, we are interested to see whether December’s +216k number is revised down. This would then represent 11 of the last 12 nonfarm payroll (NFP) jobs releases being revised lower and support the Fed’s contention that tight US labour markets are a thing of the past. We typically have a slight negative bias for the dollar on NFP day on the working assumption that investors use NFP-inspired FX liquidity to put money to work outside of the dollar. We also again want to highlight that 9 February could be a big day for FX markets. Annual US CPI benchmark revisions are released today and will confirm whether the late 2023 US disinflation trends are real – or get revised away. DXY has been trading an exceptionally tight 102.77 to 103.82 range over the last two weeks – but may be due a test of lower levels now. interest rates got a lift yesterday from the January CPI numbers where core inflation did not fall as much as expected. Our economists make a great point that the European Central Bank could be concerned that companies do have the pricing power to avoid margin pressure and will pass higher wage costs onto the consumer. Hence it makes perfect sense for the to wait until June, when it will have the wage data, to cut interest rates. did not spend too long under 1.08 at all yesterday. If today’s US figure is indeed benign, then EUR/USD can knock on the door of 1.0875/0900 again. However, one month realised volatility continues to drift around the lows near 6% and low implied volatilities suggest that investors are not expecting a pick-up in FX volatility anytime soon. Elsewhere, we were a little surprised at how the Riksbank did a full U-turn from one last hike in early 2024 to not ruling out a cut in the first half of this year. Unlike the , the Riksbank clearly seems more confident of its disinflation trend. This could end up proving a SEK negative over coming months and could favour an extension of this year’s GBP/SEK rally – perhaps even to the 13.50 area. A busy week in the region comes to an end after a hawkish National Bank of Hungary surprise on Tuesday, another conflict between the president and the government in Poland on Wednesday and an agreement with Hungary at the EU summit yesterday. However, we can at least take some risk events off the table. Next week we will see central bank meetings in Poland and the Czech Republic and the first January inflation in the CEE region in Hungary. So markets should return to the normal agenda and regain their footing. Following the EU summit chapter, the market in Hungary has started to price in rate cuts again as expected, and we think that with the inflation print next week the market will fully switch into rate-cutting mode again. Therefore, it is hard for us to be positive on the HUF at these levels as we discussed here earlier. In fact, we prefer PLN here, which seems to have become used to the political noise and has grown more resilient. Moreover, it remains the only currency supported by rates. On both sides, we think the gains have gone too far, but in the case of PLN it is not that hard to imagine an improving interest rate differential due to falling core rates supporting FX. The same cannot be said in the case of HUF. The blackout period for the Czech National Bank (CNB) began yesterday and we will therefore probably not hear anything more. Deputy Governor Jan Frait really moved the market when he said he was open to a larger rate cut, even more than 50bp at the 8 February meeting. We do know that the deputy governor was one of two board members who voted for a rate cut back in November when the CNB left rates unchanged. So the new statements aren't exactly a game changer, but we have confidence that at least two members will push for a 50bp rate cut at next week's meeting. In addition, the board will have a new forecast which we think should show very low inflation of below 3% for the upcoming months. Overall, this leads us to reassess our call from a 25bp to 50bp rate cut next week. The acceleration of the rate cut is bad for the CZK. However, we believe positioning has been heavily short here for some time and should not be so damaging. Moreover, the market is already pricing in a large portion of the rate cuts. Therefore, we do not expect significant weakness from this, but of course a short trip above 25.0 EUR/CZK is likely next week.
#UsEmployment #FxMarkets #UsRatesMarkets #FederalReserve #UsLaborMarket #NonfarmPayroll #UsCpi #EuropeanCentralBank #Riksbank #Hungary #Poland #CzechRepublic #InterestRates #Inflation
https://www.fxstreet.com/analysis/fx-daily-us-employment-continues-on-a-benign-trend-202402021002
Pound Sterling rallies on BoE’s hawkish outlook, upbeat market sentiment
==========
The Pound Sterling (GBP) has rallied on the Bank of England's (BoE) hawkish outlook and improved market sentiment. The BoE is expected to start reducing interest rates after the Federal Reserve (Fed) and the European Central Bank (ECB), and the risk-appetite of market participants has improved. Recent statements from Fed Chair Jerome Powell, ECB President Christine Lagarde, and BoE Governor Andrew Bailey indicate that the Fed and ECB are more explicit about rate cuts, while Bailey avoided speculation on rate cuts and warned of potential price pressures in the second half of the year. The GBP/USD pair is clings to gains but could face volatility ahead of the US Nonfarm Payrolls (NFP) release for January. The Pound Sterling is strengthening amid hopes that the BoE will begin rate cuts later than the Fed. The market sentiment is cheerful, and the BoE didn't express much about interest rate cuts in its monetary policy announcement. However, higher interest rates are expected to continue to hinder economic growth in the UK. The US Dollar remains on the backfoot ahead of the NFP data. The outlook for the UK economy is more vulnerable now as longer restrictive monetary policy could fade business optimism and discourage fresh investment plans. The US NFP report, which will be published at 13:30 GMT, will be closely watched for its impact on the market. The estimates suggest that US employers hired 180K workers in January, lower than the previous month's 216K recruitments. The Unemployment Rate is expected to increase to 3.8% from the previous reading of 3.7%. The Pound Sterling is set to extend its rally toward the resistance level of 1.2800, supported by multiple tailwinds. The Bank of England's decisions have a significant impact on the Pound Sterling, and its monetary policy is influenced by the achievement of its primary goal of price stability. Economic data releases, such as GDP, Manufacturing and Services PMIs, and employment figures, also influence the value of the Pound. The Trade Balance is another important indicator for the Pound, as a positive net balance strengthens the currency. However, a negative balance weakens it. The Pound Sterling (GBP) is the oldest currency in the world and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) and is issued by the Bank of England (BoE).
#PoundSterling #BankOfEngland #InterestRates #FederalReserve #EuropeanCentralBank #MarketSentiment #UsNonfarmPayrolls
Gold bulls have the upper hand near one-month top, US NFP report awaited
==========
Gold price (XAU/USD) is consolidating near a one-month top as traders await the release of the US monthly employment details. The release of the US nonfarm payrolls (NFP) report is expected to provide cues on the Federal Reserve's policy path and impact the price of gold. Factors supporting the gold price include reports of an Israel-Hamas ceasefire, bullish sentiment in global equity markets, bets on future interest rate cuts by the Federal Reserve, concerns about regional banks in the US, and worries about slowing growth in China. Technical analysis suggests that if gold breaks above the $2,065 area, it could accelerate momentum towards the $2,078-2,079 region. On the downside, strong resistance is seen at the $2,042-2,040 level. The US NFP report is expected to show that the US economy added 180K jobs in January, with the jobless rate edging higher to 3.8%.
#GoldPrice #Xau/usd #UsNfpReport #FederalReserve #Israel-hamasCeasefire #EquityMarkets #InterestRateCuts #RegionalBanks #China #TechnicalAnalysis
US NFP Preview: Nonfarm Payrolls set for another moderate increase in January
==========
The highly-anticipated Nonfarm Payrolls (NFP) data from the United States (US) is due on Friday at 13:30 GMT. The US labor market report will be published by the Bureau of Labor Statistics (BLS) and is expected to have a significant influence on the US Dollar (USD) price direction. The Nonfarm Payrolls report is expected to show that the US economy added 180,000 jobs in the first month of 2024, down from a whopping 216,000 jobs created in December. The unemployment rate is seen ticking up from 3.7% in December to 3.8% in the reported period. Average Hourly Earnings are expected to rise 4.1% in the year through January, at the same pace as seen in December. The US labor market data holds the key to gauging the timing and the pace of the US Federal Reserve (Fed) interest rate cut this year, especially after the US central bank pushed back expectations of a March rate cut following the conclusion of its two-day policy meeting on Wednesday. The Fed left its benchmark interest rates unchanged at the 5.25% to 5.50% range for the fourth consecutive meeting on Wednesday, in line with the market expectations. The statement, however, was read as slightly hawkish, as it stated, "until it has increased confidence that inflation is moving sustainably toward 2 percent, the Committee does not anticipate it will be appropriate to lower the target range for the federal funds rate." The probability of a March Fed rate fell steeply from about 50% at the start of the week to 35% after the Fed policy announcements, according to CME Group’s FedWatch Tool. Meanwhile, markets now see a 90% chance of the Fed lowering borrowing costs in May.
#UsNonfarmPayrolls #UsLaborMarket #UsDollar #UsFederalReserve #InterestRateCut
USD/INR extends its downside ahead of US NFP data
==========
The Indian Rupee (INR) is trading in positive territory for the third consecutive day, supported by the announcement of the India Budget 2024. The Finance Minister, Nirmala Sitharaman, stated that the government will focus on comprehensive governance, development, and performance, with priority given to the poor, women, youth, and farmers. The budget for infrastructure projects has increased by 11% to over $130 billion, and the government plans to build an additional 20 million affordable houses. Investors are closely watching the January US Nonfarm Payrolls data, with expectations of 185K job additions and an increase in the Unemployment Rate to 3.8%. Technical analysis suggests that the USD/INR pair remains in a bearish trend, with potential support at 82.72 and resistance at 83.00.
#Usd/inr #IndianRupee #UsNfpData #IndiaBudget2024 #FinanceMinisterNirmalaSitharaman #InfrastructureProjects #AffordableHouses
https://www.fxstreet.com/news/usd-inr-extends-its-downside-ahead-of-us-nfp-data-202402020348
Dollar to weaken, but US election is a joker – Nordea
==========
Nordea analysts predict that the US dollar will weaken in the future due to lower global interest rates and expectations of more rate cuts in the US. However, they also note that the outcome of the US presidential election and geopolitical challenges could lead to the dollar surprising positively. If Trump is re-elected, the dollar could benefit from its safe-haven status, but deficit worries under Trump could weaken the dollar more than expected. The analysts acknowledge that predicting the outcome of key events and how markets will perceive them is challenging, leading to volatile foreign exchange markets.
https://www.fxstreet.com/news/dollar-to-weaken-but-us-election-is-a-joker-nordea-202401311518