Photo - Andreas Zanin
Andreas Zanin
Analysis, Market Analysis | February 5, 2024

JASPER’S MARKET SQUAWK 05-02-2024

USD at 8-week high after Strong NFP

Market Movers

  • The dollar hits an eight-week high against major currencies.
  • Asian equities fall, with Chinese stocks at a low.
  • Yen and Euro reach two-month lows against the dollar.
  • Treasury yields jump on expectations of sustained high US rates.
  • S&P 500 maintains growth amidst strong US job data.

Econ Calendar

  • Germany trade data for December.
  • January PMI data for France, Germany, UK, and Euro zone.
  • December producer prices for Euro zone.
  • Fed Chair Jerome Powell’s recent comments impact rate cut expectations.

What’s Happening

The US dollar has soared to an eight-week high against a basket of major currencies, underscoring the market’s recalibrated expectations around the Federal Reserve’s interest rate policy following Friday’s non farm payrolls data.

In January, the US economy exceeded expectations by adding 353,000 jobs, a significant increase from December’s revised figure of 333,000, reports the Bureau of Labor Statistics. The unemployment rate remained steady at 3.7%.

There is a growing consensus that the Fed might postpone rate cuts, thanks to robust economic indicators that suggest the US economy remains resilient. Investors, initially anticipating aggressive rate reductions in light of a dovish December stance from the Fed, have had to adjust their forecasts.

The yen and the euro have experienced significant depreciation against the surging dollar, reaching two-month lows. The euro’s dip to a more than one-month trough against the dollar reflects a readjustment of expectations for Fed be ECB policy loosening.

Despite the USD strength and rising bond yields, the S&P 500 has shown remarkable resilience, buoyed by strong US economic data that suggests sustained corporate profit growth. This resilience has been further supported by positive earnings reports from leading tech companies, which have helped maintain investor confidence in the face of shifting monetary policy expectations.

Asian stock markets have felt the ripple effects, with indices across the region sliding downwards. The anticipation of a delayed rate cut by the US Federal Reserve has dented investor sentiment, particularly affecting stocks in China, which remain in the doldrums. This downturn reflects the broader impact of US monetary policy on global markets, underscoring the interconnectedness of global financial ecosystems. Investors are closely monitoring developments, gauging the potential for sustained pressure on equities in the region.

Chart of the Day

Data on the US labour market are IMPRESSIVE to say the least. Very strong economy. Don’t farm almost double the expectations and above all Hourly Wages +0.6% against an expected +0.3%, which means inflationary pressure. Attention to US regional banks, currently in pre market KRE at -2.40% close to the lows reached yesterday. The US quarterly reports saved the market from the slide last evening, let’s see today at the opening. Rates rising sharply.

Source: Matteo Marchetti, KTM Market Analyst

For all the latest market developments follow Matteo @MMTradingKTT and Key to Markets @keytomarkets on Telegram

Latest Article
Improve your trading with a True ECN Broker
Trading account overview