Mexican Peso climbs against US Dollar, despite high US Treasury yields ========== The Mexican Peso (MXN) is climbing against the US Dollar (USD) despite high US Treasury yields. The USD/MXN is trading at 17.08, down 0.28%. Mexico's economic docket for the week includes inflation data and the upcoming rate decision by the Bank of Mexico (Banxico). Expectations lean towards Banxico holding rates at 11.25%. The US economy continues to show strength with the release of strong Services PMI and Nonfarm Payrolls data, indicating a soft landing for the Federal Reserve. Banxico meets eight times a year and its monetary policy is influenced by the decisions of the US Federal Reserve. The USD/MXN is currently neutral-biased, with resistance at 17.20 and support at 17.03. The Bank of Mexico's main tool to guide monetary policy is by setting interest rates, which can influence the value of the Mexican Peso. The rate differential with the USD is a key factor. The author of the article has no position in any stock mentioned and no business relationship with any company mentioned. #MexicanPeso #UsDollar #UsTreasuryYields #BankOfMexico #FederalReserve https://www.fxstreet.com/news/mexican-peso-slides-amid-powells-hawkish-comments-202402051707

GBP/USD falls amid Powell’s comments, strong US PMIs ========== The GBP/USD falls 0.74% to 1.2535 influenced by Powell's rate stance and strong US jobs data. Powell commented that it is premature to consider cutting rates, but left the door open to easing policy. US Nonfarm Payrolls showed substantial job growth, supporting the US economy and boosting the Dollar. Rising US Treasury yields and solid economic data prompt a reassessment of Fed rate cuts. The UK services sector's positive start is overshadowed by US monetary policy and economic outlook focus. The GBP/USD has fallen below the 200-day moving average and aims to extend losses further below 1.2500. US Dollar strength and positive economic data weigh on the pair. #Gbp/usd #Powell #UsPmis #UsNonfarmPayrolls #UsDollar #UkServicesSector https://www.fxstreet.com/news/gbp-usd-falls-amid-powells-comments-strong-us-pmis-202402051828

NFP surprises, META blows the roof off the place, US strikes back in the Red Sea ========== The Nonfarm Payrolls (NFP) report for January 2024 exceeded expectations, with 353,000 new jobs created, causing unemployment to remain steady at 3.7%. Wages also surged by 0.6% month-on-month and 4.5% year-on-year, raising concerns about inflation. The strong economic data challenges the narrative of potential rate cuts by the Federal Reserve. Meanwhile, META, a company that tripled its profits, announced a $50 billion stock repurchase plan and a quarterly dividend, leading to a surge in its stock price and the broader market. The dividend announcement also opens the door for more investors to own META. The S&P 500 index continues to be influenced by a few dominant stocks, known as the "Magnificent 7," which have a significant impact on the index due to their market capitalization. The market is pricing in the expectation of rate cuts, but the data suggests a strong economy, making rate cuts less likely. Oil prices fell due to the expectation that the rate cut narrative will dampen energy demand, while gold prices declined as the US Dollar strengthened. The US futures market is showing a lower opening, and the VIX volatility index is expected to rise. This week is the last big week of earnings reports, with several major companies reporting. The market may experience some consolidation as investors reassess their appetite for risk. #NonfarmPayrolls #Meta #UsEconomy #RateCuts #StockMarket https://www.fxstreet.com/analysis/nfp-surprises-meta-blows-the-roof-off-the-place-us-strikes-back-in-the-red-sea-202402050939

Pound Sterling slides further on US NFP-led risk-off sentiment ========== The Pound Sterling (GBP) continues to face the wrath of dismal market sentiment in the European session on Monday. The GBP/USD pair drops sharply as resilient United States Nonfarm Payrolls (NFP) data on Friday have dented expectations of a rate cut from the Federal Reserve (Fed) at March’s monetary policy meeting. The UK’s poor economic prospects could force the BoE to lean towards loosening policy. The UK Office for National Statistics (ONS) reported in its revised Q3 Gross Domestic Product (GDP) estimates that the economy contracted by 0.1%. The Pound Sterling falls to a near seven-week low of around 1.2600 as the appeal for risk-perceived assets has weakened. The outlook for risk-sensitive assets has worsened as the upbeat United States employment data forced traders to pare Federal Reserve’s rate-cut bets. The Pound Sterling has come under severe pressure despite the Bank of England seeming more hawkish on the interest rate outlook than the Fed. Investors hope that a subdued economic performance and increasing geopolitical tensions could force BoE policymakers to cut interest rates earlier than expected. The United Kingdom's economy is on the brink of a technical recession. The economy witnessed a GDP contraction of 0.1% in the third quarter of 2023, and a subdued performance is anticipated in the final quarter. The UK’s vulnerable economic prospects may force BoE policymakers to join Swati Dhingra and lean towards easing interest rates in upcoming meetings. #PoundSterling #Gbp/usd #FederalReserve #BankOfEngland #InterestRates #EconomicPerformance #GeopoliticalTensions https://www.fxstreet.com/news/pound-sterling-falls-further-as-fading-fed-rate-cut-hopes-dampen-market-sentiment-202402050748

Fed Chair Powell stresses caution on rate cuts amidst positive inflation signals ========== Fed Chair Powell signaled that the Fed wants additional confirmation that the economy is on a path to bring inflation back to 2% in a sustainable way. The labor market is an important variable. The US economy added 353k jobs in January, with an upward revision for the previous two months. Despite recent wage growth, it may not be in line with sustainable inflation. US yields and German yields increased. Markets now see only about a 20% chance of a March rate cut. The dollar outperformed. Fed Chair Powell suggested that it might take until summer for the Fed to start its easing cycle. The US 2y yield increased. The Turkish central bank fired its chair and replaced her with the deputy governor. The Turkish lira holds close to all-time low levels. Slovak Finance Minister Kamenicky said that the government wants to show investors that they have a clear consolidation trajectory and that its plan to reduce the budget deficit is credible. Hungary's economy minister forecasted a higher budget deficit target for this year. Gold price remains under selling pressure. The ISM Services PMI for January is the main macro driver in focus for the US. The RBA's rate decision takes to the front on Tuesday. #FederalReserve #InterestRates #Inflation #LaborMarket #UsEconomy #Wages #Yields #Dollar #TurkishCentralBank #BudgetDeficit #GoldPrice #IsmServicesPmi #RbaRateDecision https://www.fxstreet.com/analysis/fed-chair-powell-stresses-caution-on-rate-cuts-amidst-positive-inflation-signals-202402050747

UK unemployment rate lower after new ONS data ========== The UK unemployment rate fell to 3.9% from 4.2% in the three months to November, according to new data from the Office for National Statistics (ONS). However, the economic inactivity rate was higher than previous estimates and average hours worked were revised down. The revised survey suggests that wage pressure could remain elevated, supporting the Bank of England's caution on cutting rates. The ONS will conduct face-to-face interviews to improve the quality of UK labour market data. Vodafone beat analyst estimates for organic revenue last quarter, while Fed Chair Jay Powell reiterated the forecast of three rate cuts for 2024. Chinese stocks have slumped, raising concerns about margin calls and potential political unrest. #Uk #UnemploymentRate #Ons #LabourMarket #WagePressure #BankOfEngland #Vodafone #FedChairJayPowell #RateCuts #ChineseStocks https://www.fxstreet.com/analysis/uk-unemployment-rate-lower-after-new-ons-data-202402050754

AUD/USD Outlook: Bears have the upper hand near YTD low ahead of RBA on Tuesday ========== The AUD/USD pair stages a modest recovery from the 0.6485 area, or its lowest level since November 17 touched this Monday and trades with a mild positive bias during the early European session. The USD struggles to capitalize on its modest intraday uptick to a nearly two-month peak and fails ahead of the 100-day Simple Moving Average (SMA), which, in turn, is seen as a key factor lending support to spot prices. Investors further scaled back their expectations regarding the timing and pace of rate cuts by the Federal Reserve (Fed) in the wake of Friday's blockbuster US jobs data. The headline NFP showed that the US economy added 353K new jobs in January as against the 180K anticipated. Moreover, the previous month's reading was also revised higher to 333K from the 216K reported. Meanwhile, other details of the report revealed that the unemployment rate held steady at 3.7% and Average Hourly Earnings rose to 4.5% on a yearly basis, both beating consensus estimates. Adding to this, Fed Chair Jerome Powell, speaking in an interview with the US TV show 60 Minutes, reiterated that the March meeting is likely too soon to have the confidence to start cutting interest rates. The markets were quick to react, with the probability of a 150-bps rate cut in 2024 dwindling to just 25% from being nearly certain previously. This, in turn, remains supportive of a further rise in the US Treasury bond yields and favours the USD bulls. Furthermore, geopolitical risks stemming from conflicts in the Middle East, along with worries about slowing economic growth in China, temper investors' appetite for riskier assets. This further benefits the safe-haven Greenback and contributes to keeping a lid on the risk-sensitive Aussie. Bulls might also refrain from placing aggressive bets around the Australian Dollar (AUD) in the wake of growing acceptance that the Reserve Bank of Australia's (RBA) tightening cycle is over and that the next move would be down. The bets were lifted by soft consumer and producer inflation data released last week, which ramped up expectations that prices will fall at an accelerated pace in the coming months. Hence, the market focus will remain glued to the RBA monetary policy meeting on Tuesday. From a technical perspective, Friday's close below the 100-day Simple Moving Average (SMA) for the first time since November was seen as a fresh trigger for bearish traders against the backdrop of last week's breakdown through a short-term range. Apart from this, oscillators on the daily chart are holding deep in the negative territory and are still away from being in the oversold zone. This, in turn, validates the near-term negative outlook for the spot prices, suggesting that any subsequent move-up might still be seen as a selling opportunity. #Aud/usd #Rba #FederalReserve #UsJobsData #InterestRates #UsTreasuryBondYields #MiddleEastConflicts #ChinaEconomicGrowth #ReserveBankOfAustralia #InflationData https://www.fxstreet.com/analysis/aud-usd-outlook-bears-have-the-upper-hand-near-ytd-low-ahead-of-rba-on-tuesday-202402050803

What a blast ========== The US economy added 353,000 nonfarm jobs last month, exceeding expectations of around 185,000 new job additions. The average wage growth unexpectedly accelerated to 4.5%. The probability of a March rate cut from the Federal Reserve (Fed) has fallen to less than 20%, compared to around 80% at the start of the year. The US 2-year yield jumped more than 20bp, the 10-year yield jumped past 4%, and the US dollar index rallied to its highest levels since early December. The EURUSD slipped below the 1.08 level and hit a bearish target of 1.0710. The AUDUSD slipped below its 100-DMA and is testing the 65 cents support. The stock markets were not impacted by the jump in US yields and the retreat in Fed rate cut bets. Gold remains under selling pressure. Ripple price trades around $0.50 ahead of the next key date in the SEC vs. Ripple lawsuit. The main macro driver in focus for the US is the ISM Services PMI for January. The RBA's rate decision is also awaited. The barrel of US crude fell to $72pb level last week and is not much higher this morning despite the US retaliation for last weekend's attacks. The risk of escalation with Iran remains. The first full week of February will deliver a quieter tone compared to last week. The use of this website constitutes acceptance of our user agreement. Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. #UsEconomy #JobsData #FederalReserve #InterestRates #UsDollar #StockMarkets #Gold #Ripple #SecLawsuit #OilPrices https://www.fxstreet.com/analysis/what-a-blast-202402050645

Week ahead: What are the markets watching this week? ========== The first full week of February will deliver a quieter tone compared to last week. Monday’s ISM Services PMI for January is the main macro driver in focus for the US, while in Asia Pac, the Reserve Bank of Australia’s (RBA) rate decision takes to the front on Tuesday. Last week’s stage was set exclusively for the Fed, and the primary message was to forget March. While the FOMC left the target rate unchanged at 5.25%-5.50%, it opened the door to rate cuts but the Fed Chairman Jerome Powell almost explicitly pushed back against March’s policy meeting, in line with Futures market pricing (24% probability priced in as of writing). Meanwhile, we have also seen a rate repricing for May’s policy meeting following Friday’s NFP beat, effectively nudging things in favour of a 25bp cut out to June (44bps) rather than May (22bps). Traders also welcomed a slew of US jobs data last week, including increased Job Openings (increased to a little more than 9 million in December 2023; however, with the upward revision of the previous number to 8.93 million, there was little change), weak ADP employment growth (107,000), as well as a -0.4-percentage point drop in the ISM Manufacturing PMI employment component from 47.5 to 47.1 and weekly jobless filings jumping to 224k from a slightly upwardly revised 215k print. On top of this, Friday witnessed a monster beat on the non-farm payrolls release; the US economy added 353,000 new jobs in January, surpassing all estimates and breezing through the 216,000 jump in December. The unemployment rate remained unchanged at 3.7%, and the year-on-year earnings surged to 4.5% (M/M rose 0.6%), smashing through all estimates and the prior (4.1%). This week’s ISM Services PMI print will essentially be the highlight event for the US, gracing the airwaves at 3:00 pm GMT. The market’s median estimate is for an increase to 52.0, up from 50.6 in December 2023 (the estimate range is between 53.0 and 50.6). As for the RBA, no fireworks are expected here. The central bank, scheduled for 3:30 am GMT, is widely expected to hold its Cash Rate unchanged at 4.35% on 6 February for a second consecutive meeting (a 12-year high). #Markets #IsmServicesPmi #ReserveBankOfAustralia #UsJobsData https://www.fxstreet.com/analysis/week-ahead-what-are-the-markets-watching-this-week-202402042241

EUR/USD remains below 1.0900 post intraday gains, US Nonfarm Payrolls eyed ========== EUR/USD extends gains as US Dollar weakens after mixed US data. Euro could face challenges as markets speculate over an ECB interest rate cut in June. US Dollar could suffer further losses if the US NFP declines as anticipated. EUR/USD gained upward support following mixed economic data from the United States (US). The subdued US Treasury yields contribute to adding pressure on the US Dollar (USD). US Treasury yields experienced downward pressure following reports from regional bank New York Community Bancorp, which indicated increased stress in its commercial real estate portfolio. The US Dollar Index (DXY) struggles to retrace its recent losses. The DXY trades around 103.00, with the 2-year and 10-year US Treasury yields hovering around 4.23% and 3.88%, respectively. US Nonfarm Payrolls (NFP) data is set to be released, including US Average Hourly Earnings and Nonfarm Payrolls (NFP). EUR/USD advances to near 1.0880 on Friday, close to the immediate resistance around the psychological level at 1.0900. The major level at 1.0850 appears as the key support. The US Dollar is struggling to find its feet, allowing the Euro to stretch higher amid an upbeat mood. All eyes now remain on the US NFP data release. #Eur/usd #UsNonfarmPayrolls #UsDollar #Euro #EcbInterestRateCut https://www.fxstreet.com/news/eur-usd-extends-gains-towards-10900-as-traders-brace-for-nfp-202402020922

FX daily: US employment continues on a benign trend? ========== The focus in FX markets today is on whether US employment continues on its benign downward path and represents the economy coming into ‘better balance’. Of interest will be whether December’s number gets revised down – marking 11 downward revisions out of 12 last year. We could see the return of a marginally more pro-risk environment. This week’s price action in US rates markets is instructive. Despite the Federal Reserve pushing back against prospects of a March cut, interest rates have still come lower. That may be a function of investors watching US regional banks remain under pressure. Or more likely it reflects a conviction call that policy rates are coming lower this year and there is no point fighting this overwhelming trend. This is the reason that the dollar did not build on gains seen early yesterday. Coming to today, we have the US January jobs report. Consensus is for +185k in jobs gains, while we forecast +200k. However, the Fed seems pretty comfortable that the labour market is coming into better balance and we doubt a +200k number needs to trigger a major repricing of the Fed easing cycle. Instead, we are interested to see whether December’s +216k number is revised down. This would then represent 11 of the last 12 nonfarm payroll (NFP) jobs releases being revised lower and support the Fed’s contention that tight US labour markets are a thing of the past. We typically have a slight negative bias for the dollar on NFP day on the working assumption that investors use NFP-inspired FX liquidity to put money to work outside of the dollar. We also again want to highlight that 9 February could be a big day for FX markets. Annual US CPI benchmark revisions are released today and will confirm whether the late 2023 US disinflation trends are real – or get revised away. DXY has been trading an exceptionally tight 102.77 to 103.82 range over the last two weeks – but may be due a test of lower levels now. interest rates got a lift yesterday from the January CPI numbers where core inflation did not fall as much as expected. Our economists make a great point that the European Central Bank could be concerned that companies do have the pricing power to avoid margin pressure and will pass higher wage costs onto the consumer. Hence it makes perfect sense for the to wait until June, when it will have the wage data, to cut interest rates. did not spend too long under 1.08 at all yesterday. If today’s US figure is indeed benign, then EUR/USD can knock on the door of 1.0875/0900 again. However, one month realised volatility continues to drift around the lows near 6% and low implied volatilities suggest that investors are not expecting a pick-up in FX volatility anytime soon. Elsewhere, we were a little surprised at how the Riksbank did a full U-turn from one last hike in early 2024 to not ruling out a cut in the first half of this year. Unlike the , the Riksbank clearly seems more confident of its disinflation trend. This could end up proving a SEK negative over coming months and could favour an extension of this year’s GBP/SEK rally – perhaps even to the 13.50 area. A busy week in the region comes to an end after a hawkish National Bank of Hungary surprise on Tuesday, another conflict between the president and the government in Poland on Wednesday and an agreement with Hungary at the EU summit yesterday. However, we can at least take some risk events off the table. Next week we will see central bank meetings in Poland and the Czech Republic and the first January inflation in the CEE region in Hungary. So markets should return to the normal agenda and regain their footing. Following the EU summit chapter, the market in Hungary has started to price in rate cuts again as expected, and we think that with the inflation print next week the market will fully switch into rate-cutting mode again. Therefore, it is hard for us to be positive on the HUF at these levels as we discussed here earlier. In fact, we prefer PLN here, which seems to have become used to the political noise and has grown more resilient. Moreover, it remains the only currency supported by rates. On both sides, we think the gains have gone too far, but in the case of PLN it is not that hard to imagine an improving interest rate differential due to falling core rates supporting FX. The same cannot be said in the case of HUF. The blackout period for the Czech National Bank (CNB) began yesterday and we will therefore probably not hear anything more. Deputy Governor Jan Frait really moved the market when he said he was open to a larger rate cut, even more than 50bp at the 8 February meeting. We do know that the deputy governor was one of two board members who voted for a rate cut back in November when the CNB left rates unchanged. So the new statements aren't exactly a game changer, but we have confidence that at least two members will push for a 50bp rate cut at next week's meeting. In addition, the board will have a new forecast which we think should show very low inflation of below 3% for the upcoming months. Overall, this leads us to reassess our call from a 25bp to 50bp rate cut next week. The acceleration of the rate cut is bad for the CZK. However, we believe positioning has been heavily short here for some time and should not be so damaging. Moreover, the market is already pricing in a large portion of the rate cuts. Therefore, we do not expect significant weakness from this, but of course a short trip above 25.0 EUR/CZK is likely next week. #UsEmployment #FxMarkets #UsRatesMarkets #FederalReserve #UsLaborMarket #NonfarmPayroll #UsCpi #EuropeanCentralBank #Riksbank #Hungary #Poland #CzechRepublic #InterestRates #Inflation https://www.fxstreet.com/analysis/fx-daily-us-employment-continues-on-a-benign-trend-202402021002

Pound Sterling rallies on BoE’s hawkish outlook, upbeat market sentiment ========== The Pound Sterling (GBP) has rallied on the Bank of England's (BoE) hawkish outlook and improved market sentiment. The BoE is expected to start reducing interest rates after the Federal Reserve (Fed) and the European Central Bank (ECB), and the risk-appetite of market participants has improved. Recent statements from Fed Chair Jerome Powell, ECB President Christine Lagarde, and BoE Governor Andrew Bailey indicate that the Fed and ECB are more explicit about rate cuts, while Bailey avoided speculation on rate cuts and warned of potential price pressures in the second half of the year. The GBP/USD pair is clings to gains but could face volatility ahead of the US Nonfarm Payrolls (NFP) release for January. The Pound Sterling is strengthening amid hopes that the BoE will begin rate cuts later than the Fed. The market sentiment is cheerful, and the BoE didn't express much about interest rate cuts in its monetary policy announcement. However, higher interest rates are expected to continue to hinder economic growth in the UK. The US Dollar remains on the backfoot ahead of the NFP data. The outlook for the UK economy is more vulnerable now as longer restrictive monetary policy could fade business optimism and discourage fresh investment plans. The US NFP report, which will be published at 13:30 GMT, will be closely watched for its impact on the market. The estimates suggest that US employers hired 180K workers in January, lower than the previous month's 216K recruitments. The Unemployment Rate is expected to increase to 3.8% from the previous reading of 3.7%. The Pound Sterling is set to extend its rally toward the resistance level of 1.2800, supported by multiple tailwinds. The Bank of England's decisions have a significant impact on the Pound Sterling, and its monetary policy is influenced by the achievement of its primary goal of price stability. Economic data releases, such as GDP, Manufacturing and Services PMIs, and employment figures, also influence the value of the Pound. The Trade Balance is another important indicator for the Pound, as a positive net balance strengthens the currency. However, a negative balance weakens it. The Pound Sterling (GBP) is the oldest currency in the world and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) and is issued by the Bank of England (BoE). #PoundSterling #BankOfEngland #InterestRates #FederalReserve #EuropeanCentralBank #MarketSentiment #UsNonfarmPayrolls https://www.fxstreet.com/news/pound-sterling-strengthens-amid-hopes-that-boe-will-begin-rate-cuts-later-than-fed-202402020803

Gold bulls have the upper hand near one-month top, US NFP report awaited ========== Gold price (XAU/USD) is consolidating near a one-month top as traders await the release of the US monthly employment details. The release of the US nonfarm payrolls (NFP) report is expected to provide cues on the Federal Reserve's policy path and impact the price of gold. Factors supporting the gold price include reports of an Israel-Hamas ceasefire, bullish sentiment in global equity markets, bets on future interest rate cuts by the Federal Reserve, concerns about regional banks in the US, and worries about slowing growth in China. Technical analysis suggests that if gold breaks above the $2,065 area, it could accelerate momentum towards the $2,078-2,079 region. On the downside, strong resistance is seen at the $2,042-2,040 level. The US NFP report is expected to show that the US economy added 180K jobs in January, with the jobless rate edging higher to 3.8%. #GoldPrice #Xau/usd #UsNfpReport #FederalReserve #Israel-hamasCeasefire #EquityMarkets #InterestRateCuts #RegionalBanks #China #TechnicalAnalysis https://www.fxstreet.com/news/gold-price-stands-tall-near-one-month-peak-as-spotlight-shifts-to-us-nfp-report-202402020405