Written by Steven Dooley and Shier Lee Lim
Greenback boosted by US jobs
The US dollar climbed to the highest level since early December over the weekend after a red-hot US jobs report boosted the currency.
Financial markets had forecast around 190k new jobs in the January report but instead found an incredible 353k jobs were created – the largest number in 12 months.
The unemployment rate fell from 3.8% to 3.7% while average hourly earnings were up 0.6% (versus forecasts of 0.4%) or 4.5% in annual terms.
The jobs number feeds into a recent trend of stronger-than-expected US economic data with the Alanta Fed GDPNow forecasting March-quarter growth at an incredible annualised rate of 4.1%.
The stronger US data pushed the AUD/USD down 0.9% while NZD/USD dropped 1.2%.
The EUR/USD lost 0.7% while GBP/USD fell 0.9%.
In Asia, the USD/JPY jumped 1.3%, USD/SGD gained 0.4% while USD/CNH climbed 0.4%.
US growth strong, but might decline
While US growth is strong for now, growing monetary headwinds, diminishing fiscal offsets, and easing post-pandemic tailwinds should all cause GDP to drop to below trend in 2024.
We do not see inflation returning to 2% in the near term, and a more accommodating labor market will be necessary to achieve the “last mile” of lower inflation. This means the Fed is likely to be forced to maintain mildly tight policy.
Emerging FX looks more positive
In 2024, we anticipate a small moderate to near-trend increase in EM.
In 2024, EM easing cycles will become more widespread, but rate reduction will probably stay modest as authorities strike a compromise between high real domestic rates and tight global financial conditions.
Strong EM macro fundamentals should act as a safety net in the event that the US in 2024 takes a less favorable turn.
Greenback at highs, JPY at lows post jobs
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 5 – 10 February
All times AEDT
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
