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02.01.2024 01:02 PM
Deteriorating US labor market will stimulate risk appetite and globally weaken dollar

Global markets open today, albeit not completely. Exchanges in Europe and the US have resumed operations, while the holidays continue in other regions.

Looking at the overall dynamics, investors may continue the bullish momentum noted at the end of last year. The main driver of this will be the expected easing of interest rates by the Fed and other global central banks.

Upcoming economic data, especially those related to the US labor market, will also affect the market's direction. ADP's report on the number of new jobs, which forecasts say will increase to 113,000 in December compared to 103,000 in November, could lead to a decline in dollar because the figure remains very low and the labor market needs a stable number above 200,000. Similarly, although a slight decrease in the number of jobless claims, from 218,000 to 215,000, may be seen, the total number remains above 200,000.

Official data from the US Department of Labor will also attract attention as it will show changes in employment in December, the number of new jobs, the average length of the workweek, and the average hourly earnings. For the number of new jobs, a decrease in growth from 199,000 to 163,000 may occur. The unemployment rate may slightly rise from 3.7% to 3.8%, while the average length of the workweek may remain at 34.4 hours. Hourly earnings may decrease from 0.4% to 0.3%.

A worsening situation in the labor market will be a strong signal for the purchase of risk assets and the weakening of dollar. Such a piece of news can be interpreted by the Fed as an important reason to start lowering interest rates in the first quarter of 2024.

Forecasts for today:

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EUR/USD:

The pair found support at the level of 1.1000. The worsening situation in the US labor market, as well as the likely resumption of inflation growth in the Eurozone, could be the basis for growth to 1.1130.

GBP/USD

The pair traded at 1.2700. Weakening dollar due to a bleak picture in the US labor market may lead to an increase to 1.2825.

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