The highlight of today’s session comes in the form of a labour market update, and traders will fixate upon the results to more accurately gauge the trajectory of rates from the Fed in the foreseeable future. Even though the US employment market managed to steer clear from catastrophic predictions, it is currently being found in a limbo state, neither collapsing, nor thriving.
Market participants however hold disproportionally pessimistic views for the US labour market force and thus will scroll through the December Non-Farm Payrolls data to better understand its current state and assess whether looser policy conditions can be warranted going forward.
Polled economists project that the US economy has managed to add 66k new jobs in the month of December, round and about November’s 64k result and in regards to the unemployment rate a 0.1% drop to the 4.5% level is widely expected, easing slightly from November’s 4-year high of 4.6%
Sentiment faced challenges earlier this week as the latest JOLTS jobs openings figure undershot expectations, dropping to 7.1m in the month of November (vs 7.6m estimates) and likewise private payrolls data from the ADP showcased a 41k new jobs being created, less than the 49k expectation.
In money markets Fed Funds Futures probabilities point to the extension of the current policy regime in both the January and March decisions with the Federal Reserve keeping rates intact at the 3.75%-4% level but nevertheless favour a 25bps rate reduction at April’s FOMC rate decision and another 25bps cut at the September meeting.
Should the report showcase a below estimates headline NFP figure and an uptick of the unemployment rate, the timeline for rate cuts may shorten, with the odds for rate reductions in January and March experience rises. That would possibly translate into weakness for the US dollar which has seen inflows since the start of the year, and on the flip side, that could entice investors to allocate more capital into US equities and push stock market indices into new record high territory.
Technical Analysis
NASDAQ Chart – US tech equity index Nasdaq 100 consolidates near record highs ahead of NFP data
Resistance: 25850 (R1), 26255 (R2), 26700 (R3)
Support: 25200 (S1), 24650 (S2), 23850 (S3)