Treasury and Wall Street soared on the heels of the NFP data where the net effect is a tempering in Fed rate hike expectations. The markets are cheering the cooling in wage growth and a softer but still resilient labor market. The erosion in the service sector is a bit ominous but adds to the belief that the FOMC will soften its stance with a 25-50 bp hike on February 1 following the 50 bp tightening in December.
The jump in the workforce and easing wage growth & further signs of an economy slowing down with services contracting for the first time in more than 2-1/2 years in December = US economy recession, & Fed on its hiking path but no need to do too much!
- The USD Index falls 9% from peaks. It drifted to 103.23 from 105.40 on Friday after the NFP. Fed funds futures are suggesting a 4.958% terminal rate in June.
- China’s re-opening of its borders – could add further pressure on USD.
- EUR – spiked to nearly 1.0700.
- JPY – slightly higher today at 132.16 from 131.20 bottom.
- GBP – gaining 0.42% to 1.2166, after spiking 1.5% on Friday.
- Stocks – The US markets surged. US500 +2.28% and USA100 +2.56%. APPL +3.68%, AMZN +3.56%, MSFT +1.18%.
- Treasury yields dove, led by the short end as the market priced out the more hawkish Fed bets. The 2-year rate plunged 20 bps to a low of 4.243%.
- USOil – rose after Chinese announcement. Today trades at $75.30.
- Gold – reversed 60% from 2022 downleg. Breached $1880.
- BTC – rise to 17166.23.
Today – Fed’s Bostic and BOE’s Pill speak, Japan’s PM Kishida meets with France’s President Macron, Eurozone unemployment. Earnings season kicks off this week with the major US banks.
Biggest FX Mover @ (07:30 GMT) AUDUSD (+0.78%). Trade-and-China sensitive AUD up to 0.6945 today. MAs flattened but MACD histogram & signal line remain positive and rising. RSI 67 but turns slightly lower, H1 ATR 0.00166, Daily ATR 0.0096.
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Andria Pichidi
Market Analyst
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