Week Ahead – US jobs report and Eurozone inflation to kickstart the New Year
XM Group | Dec 29, 2023 03:59AM ET
- NFP report and Eurozone CPI will be the week’s focal point on Friday
- FOMC minutes and ISM PMIs will also be crucial for the US dollar
- Canadian employment and Chinese PMIs might attract attention too
Rate cut bets in overdrive
It’s been one big rollercoaster ride for the US dollar in 2023, as hopes of a Fed pivot were repeatedly dented by surprisingly strong economic data, which more often than not, has come from the robust performance of the American labour market. But traders seem surer this time that a pivot is just around the corner, as Fed chief Powell himself has dropped subtle hints about it.
Thus, despite a powerful rebound during the summer and autumn, the greenback looks set to finish the year with losses of almost 3% against a basket of currencies. That rally was driven by a surge in Treasury yields, which have since been tarnished by heightened expectations of aggressive rate cuts over the coming year.
However, the forecasts for the underlying measures of inflation are more encouraging, with core CPI that excludes food and energy, as well as tobacco and alcohol prices, projected to decline from 3.6% to 3.4% y/y.
If that turns out to be the case, investors may well leave their rate cut wagers untampered, meaning there may not be any additional boost for the euro against the greenback from any pickup in headline inflation.
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