Weekly Forecast: Impact of Strong US Labor Data on Fed Rate Cut
On December 7, 2024, an important US economic indicator, the Non Farm Payroll (NFP), was released ahead of the FOMC meeting. The NFP showed robust growth, with 12-month employment gains exceeding expectations and earlier data suggesting a healthy increase of 36,000 jobs.
Despite this positive trend, the US unemployment rate rose from 4.1% to 4.2%. The average monthly wages also saw a modest uptick of 0.1%, surpassing forecasts.
Overall, the economic outlook appears strong, bolstered by an optimistic labor market outlook, potentially prompting the Fed to consider a 25 basis point interest rate cut. President Donald Trump’s economic plan also contributes to this progress, as his administration begins implementing necessary adjustments.
Given the uncertainties leading up to the year-end, it’s advisable to monitor developments rather than take risks. Market watchers are keenly observing the US Producer Price Index (PPI) and Consumer Price Index (CPI) data this week, crucial for the Fed’s rate decision. Additionally, the ECB and Bank of Canada meetings are anticipated, both likely to announce 25 basis point rate cuts.
The European Central Bank faces challenges in balancing interest rate cuts with worsening economic estimates. Geopolitical risks, highlighted by recent events in South Korea and French elections, add further uncertainties.
In terms of trading insights, gold’s resistance at $2652 could hinder an upward move, whereas breaking $2612-15 might aim for $2595-00 levels. The Euro remains exposed to downward risks below 1.0720, poised for recovery if it breaches 1.0460. The Pound Sterling should hold at 1.2580-00 levels and test 1.2840 zones with an upward break past 1.2790-00. Lastly, the JPY’s resistance at 151.20 implies a dip if 148.40 breaks, targeting 147.70-80 levels.
It’s important to note that these insights reflect the author’s opinions and are intended for informational purposes only. They should not be considered financial advice for making investment decisions.