Photo - Andreas Zanin
Andreas Zanin
Analysis, Market Analysis | January 8, 2024

JASPER’S MARKET SQUAWK 08-01-2024

March Cuts in Doubt

Equity indices snapped their losing streaks on Friday but struggled for direction as a strong jobs report blurred the outlook for a March rate cut while downward revisions of prior prints saw some traders cling to March bets.

Chart: EURUSD

Key Factors for Today

  • US Jobs Report Beats Estimates, Raises Questions About Rate Cuts as Soon as March
  • Eurozone Inflation Hits 2.9% in December, Money Markets Lower Cut Expectations
  • Oil Prices Jump on Middle East Tensions, But Pressured by Saudi Arabia’s Price Cut
  • UK Employers Increase Pay and Hiring as Availability Grows, Suggesting Higher BOE

NFP Upbeat But Revisions and ISM Employment Cast Doubt

The US economy added 216K jobs in December, beating estimates of 170K. However, downward revisions of prior prints reduced gains overall, with a steep decline in the participating rate weighing in. Wage gains also exceeded expectations to 0.4% from 0.3% forecasts, with the unemployment rate steady at 3.7% but above expectations of a 3.8% rise. The dollar was volatile as ISM Services employment plunged from 50.7 in November to 43.3, leaving traders confused about whether a March cut was still possible. Trading around 102 requires a solid catalyst to move past 102.50 or 101.50. Meanwhile, Richmond Fed President Thomas Barkin and Dallas’ President Lorie Logan expressed hawkishness following the Nonfram Payrolls report.

Eurozone Inflation Reduces Size of ECB Rate Cuts

Eurozone inflation rose to 2.9% in December from 2.4% in November, matching economists’ estimates. The increase was due to governments removing support measures for high energy costs and higher food and services costs.​ Following the print, money markets lowered rate cut expectations to 147 basis points, and the EURUSD moved higher but had a mixed close despite spiking to 1.0999 during the NFP. Support remains at 1.0910.

Saudis’ Price Cut Nearly Offsets MidEast Tension Surge

Oil prices settled over 2% higher on Friday due to tensions in the Middle East and after US Secretary of State Antony Blinken began a Middle East tour. Prices rebounded from losses on Thursday due to robust employment data indicating higher fuel demand, hitting a high of $74 per barrel. However, WTI came under pressure early on Monday as Saudi Arabia slashed its oil prices for Asia to the lowest level in 27 months, exposing $71.30/b.

REC Employment Data Point to BOE Staying Higher For Longer

According to the REC survey published early Monday, British employers increased pay and hired more workers but at a slower pace in December. Vacancies fell for the third time in four months, but the availability of candidates to fill jobs grew again, suggesting the BOE may view it as a reason to keep interest rates high. Cable ended Friday mixed but predominantly green following stronger services PMIs and consumer borrowing, with today’s print unable to move prices. However, with GBPUSD above 1.27, the door to 1.28 is left wide open, with support at 1.2610.

On The Docket

  • German Factory Orders
  • CH CPI Inflation
  • EA Economic Sentiment
  • EA Retail Sales
  • Fed Bostic Speech
  • ES Consumer Confidence
  • US Consumer Credit

FX 1-Day Relative Performance (USD)

  • Aussie 0.07% lower, Kiwi unchanged
  • Euro 0.03% up while Pound 0.03% down
  • Loonie 0.10% down, Franc 0.15% lower
  • Japanese yen 0.26% in the green zone
  • Gold 0.53% down, Silver firmer at -0.32
  • WTI and Brent 0.48% and 1.38% in red
  • Natural gas 1% in negative territory
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