2023 Economic Recap: Taming Inflation and Avoiding Recession
NFP Release: Setting the Stage for 2024.
Inflation remained the highlight in 2023, just as it has been in 2022, but the Fed and the other central banks across the globe largely managed to tame it. The Federal Reserve led the charge in the fight against inflation, successfully curbing it by increasing the interest rate to record levels in 2022 and 2023. This brought the US Dollar to a two-decade peak in 2022 but in 2023 it has been mostly range bound.
The Fed’s crucial pivot in December 2023 will fuel speculation going into 2024. When will the cuts start? How big will they be? Where will they stop? According to James Knightley, who is ING’s chief international economist, the Fed will cut the rate 6 times in 2024. The cuts are expected to be 25 basis points each, totaling 150 basis points across the year.
Economic Calendar Highlights
We start 2024 in full force with a lot of high-impact economic releases. The first notable one is the ISM Manufacturing PMI, scheduled Wednesday at 3:00 pm GMT and followed at 7:00 pm GMT by the FOMC Meeting Minutes, a document that contains a detailed record of the latest Fed meeting.
Thursday at 12:00 pm GMT we take a look at German inflation with the release of the Preliminary CPI and later at 1:15 pm GMT, the U.S. labor market takes center stage with the release of the ADP Non-Farm Employment Change.
Eurozone’s Core CPI Flash Estimate will be released Friday at 10:00 am GMT, followed by the “main attraction” of the week: the U.S. Non-Farm Payrolls report, which is scheduled at 1:30 pm GMT. The NFP report will be accompanied as usual by the Average Hourly Earnings and Unemployment Rate. Together, these releases will probably create the biggest volatility of the first trading week of 2024.
Technical Outlook – EUR/USD
After breaking the key level at 1.1000, the Euro bulls managed to take the pair to a high of 1.1139 but it seems like the US Dollar is staging a comeback.
Since mid-November 2023, the Relative Strength Index has been hitting its head on the overbought level and has shown bearish divergence. This increases the chance of a pullback, which may have 1.1000 as a target.
Given the New Year celebrations, we will probably see irregular volatility during the first part of the week but it will probably pick up gradually, culminating with the release of the U.S. jobs data.
