NFP Surprises to the Upside Again. Is a March Cut Still On?
The Buck Buckles Up for Inflation Data. CPI Ahead.
Last week’s Non-Farm Payrolls report showed that the jobs market in the United States is stronger than expected, which could determine the Fed to postpone the rate cuts. Before the NFP release, the probability of a rate cut in March was around 90% but at the time of writing, it stands at around 61%, according to CME’s FedWatch tool.
The U.S. economy added 216K new jobs, as opposed to the 168K estimate. The Unemployment Rate remained unchanged at 3.7%, while the consensus was an increase to 3.8%. At the same time, hourly wages increased by 0.4%, while analysts expected 0.3%.
Inflation will remain in the spotlight this week, with the release of the Consumer Price Index (CPI), which could alter the market’s perception and the Fed’s view on rate cuts.
Economic Calendar Highlights
The CPI is set for release on Thursday at 1:30 pm GMT and it will be among the few market movers of the week. The headline figure is expected to increase from the previous 0.1% to 0.2%, while the Core CPI is expected to drop from 0.3% to 0.2%. These are not big changes and the dollar will remain relatively tame if the actual numbers match the expectations.
The other notable event of the week will be the release of the U.S. Producer Price Index (PPI) scheduled for Friday at 1:30 am GMT. The indicator shows changes in the price charged by producers for their goods and services and has inflationary implications because a higher producer price ultimately translates into a higher consumer price.
Technical Outlook – EUR/USD
The first trading week of 2024 favored the US Dollar bulls, who managed to take the pair back below the resistance at 1.1000. However, the best day of the week for the USD was Tuesday, January 2nd when no economic data came out. It just goes to show how the changing of the year can affect the market.
The next approaching hurdle and potential target is the bullish trend line, which is in close proximity to the 50-day Moving Average. This confluence zone will probably attract the price and we will see a tug-of-war around it. There are a lot of candles with long wicks, which usually signify indecision but this time they could be a result of the irregular volatility characteristic to the end and beginning of the year.
