Weekly Economic & Financial Commentary: A March Rate Cut Bites the Dust

It was a busy week for economic data, but Friday's employment report stole the show. Nonfarm payrolls rose 353K in January, almost double the consensus expectation. While we suspect the Federal Reserve will put more weight on the Employment Cost Index's soft reading on labor cost growth in Q4, the pickup in average hourly earnings and overall strength in hiring suggest the odds of a rate cut in March are quickly fading.

Forex and Cryptocurrencies Forecast

Throughout January, a series of indicators: GDP, employment, and retail sales, consistently highlighted the strength of the US economy. The threat of recession diminished, and it became evident that the high interest rate did not significantly hinder economic performance. Market participants were keenly awaiting the Federal Open Market Committee (FOMC) meeting of the US Federal Reserve, scheduled for Wednesday, January 31, against the backdrop of these positive economic indicators.

Pushing Down Crypto Isn't Easy

Bitcoin remains at $43.0K. At the start of trading on Monday, there was an attempt to sell the price lower amid weakness in the Chinese markets. However, BTCUSD was bought back twice on dips to $42.2K. This solid support significantly weakened the sellers’ onslaught, which quickly brought the price back to $43,000 – the centre of gravity for the exchange rate since early December. That’s also where the 50-day moving average now sits, suggesting that the market is still undecided about direction.

AUD/USD Eyes RBA Rate Decision

The Australian dollar is slightly lower on Monday, after sliding 0.90% on Friday. In the European session, AUD/USD is trading at 0.6499, down 0.21%. Earlier, AUD/USD traded as low as 0.6486, its lowest level since mid-November.

Euro Falls to Two-Month Low

EUR/USD has extended its losses on Monday. In the European session, the euro is trading at 1.0749, down 0.34%. Earlier, the euro fell as low as 1.0747, its lowest level since December 11.

Sunset Market Commentary

The payrolls-Powell combo resonated through today’s European trading session in absence of other data/events. It put core bonds under further pressure from the start with US Treasuries underperforming German Bunds.

ISM Shows Services Sector Expansion Accelerates in January

Well, a healthy print from the services sector today. At 53.4, the index shows the sector continues to grow at a healthy clip, with new demand growth reaccelerating again in January. Moreover, the recovery in employment growth suggests December's contractionary reading was an outlier rather than a structural shift.

ISM Data Points to a Stronger Than Expected US Service Sector

In the US, ISM Services Index for January surprised to the upside. The PMI came in at 53.4 (prior 50.6), which compares to a Reuters poll showing consensus expectations of 52.0. The Prices Paid, New Orders, and Employment Index also all came in higher than December's print. The upside surprise in the ISM Services Index aligns with how most recent US data releases have surprised to the upside.

Turning the Mill With Carried Water

Buying Chinese equities feels like catching a falling knife. The Chinese stock markets are in a better shape this morning as authorities came up with fresh measures to stop bleeding in Chinese stock markets. This time, China announced trade restrictions on domestic institutional investors and some offshore units, and imposed caps on some cross-border swaps that could be used to short Hong Kong stocks. They also told some brokers not to reduce their exposure to mainland shares.

S&P 500 Renews Record Ahead of Big Tech Earnings, Fed Decision

It was yet another day, and another record high for the US major stock indices. The S&P500 traded to 4930 for the first time, driven higher by falling US yields after the US Treasury surprisingly cut its quarterly borrowing estimate, on hope that five of 7 Magnificent stocks will surprise positively when they reveal their results this week, and on hope that we might hear something relatively dovish from the Federal Reserve (Fed) meeting this week.