Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Job market resilience pushes back rate cut expectations
The USD index surged to test 110 following the stronger-than-expected December nonfarm payrolls report showing +256k jobs and unemployment falling to 4.1%.
Chart shows the length of US unemployment
The euro weakened significantly with EUR/USD sliding below 1.0250, while GBP/USD declined towards 1.2200.
USD/JPY retreated below 158.00 after testing 159.00, bucking the broader USD strength.
Asian markets are poised for a mixed open, with investors digesting the implications of stronger US employment data on the Federal Reserve’s rate cut timeline.
The robust jobs data has prompted markets to pare back expectations for early rate cuts in 2025.
Growth and inflation data key this week
FX markets will be driven by growth and inflation data releases this week, with key indicators due from major economies including China, US, UK, and Europe.
China’s GDP data will be closely watched on Friday, with expectations for Q4 growth at 5% year-over-year, along with December industrial production forecast at 5.4% and retail sales at 3.5% — providing crucial insights into the world’s second-largest economy’s growth trajectory.
Inflation readings will be in focus with CPI data from major economies: US CPI On Thursday, UK CPI on Wednesday, and Eurozone final HICP on Friday.
In other key data, US retail sales on Friday are expected to show 0.5% growth, while Australia’s unemployment rate due Thursday is forecast to rise to 4.0%.
China trade balance to show export recovery
Today, the trade balance for China will be released. Despite a larger base from 2023, we anticipate export growth to recover to 8.1% year-over-year in December from 6.7% in November.
Data suggests that overall export growth momentum has improved again in December after a somewhat unexpected but significant slowdown in November.
Despite a somewhat larger base, import growth in USD terms is probably going to rise marginally to -2.0% year-over-year in December from -3.9% in November.
On USDCNH, we have a medium-term positive outlook. After breaking above 7.3077, USDCNH invalidated the rising wedge. A move to 7.4616 would be next if there is a breakout over 7.3682. (Note that chart shows USD/CNY).
Aussie crosses took a dive on jobs data
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 13 – 18 January
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.
