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US jobs data ahead of next week’s Fed decision

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By Craig Erlam  

The next couple of weeks could be massive for markets going into 2024, with a range of data from the US in the coming days setting us up nicely for the Fed meeting on December 13.

The standout event is the jobs report on Friday, with the Federal Reserve still seemingly of the view that getting inflation sustainably back to target will require some more slack in the labour market.

Another weaker report, especially one paired with 0.2% monthly wage growth, could further fuel the belief that not only is the tightening cycle over, but rate cuts may not be far away.

Fed Chair Jerome Powell’s comments on Friday ahead of the start of the blackout period appeared to suggest the U.S. central bank needs no more convincing.

In a short time, the narrative has shifted from further tightening likely being necessary and rates remaining higher for longer to being prepared to tighten further if it becomes appropriate.

The dot plot next week is far less about whether the committee is anticipating another hike, rather when they expect the first cut. Markets are pricing a March cut as slightly more likely than not and by May as almost certain.

Even with a late pivot, that doesn’t leave the Fed much time, so we’ll need to see a stark difference in next week’s forecasts compared with September and an acknowledgement of a rate cut soon.

There are plenty of other US releases this week, including JOLTS job openings and the ISM services PMI on Tuesday, ADP employment figures on Wednesday, and jobless claims on Thursday. Monday was quieter with markets a little subdued in Europe.

Oil prices decline further after OPEC+ “deal”

The OPEC+ “deal” last week was unconvincing, to say the least, and oil prices have been in decline ever since.

Brent crude is off around 8% from Thursday’s highs and not trading far from the November lows. There’s a lack of unity around the recent cuts, so compliance is going to be a major issue.

And with markets seemingly anticipating more of an economic slowdown next year, the announcement simply doesn’t go far enough.

It’s another large cut, but how much will actually be delivered on? And are we at the limits of what the alliance is willing to achieve to balance the markets?

Gold hits new high

Gold entered record territory in early trade this week, bursting through the previous peak, before exploding higher to reach $2,135, and then giving it all back over the next few hours.

Perhaps the combination of pending orders above the previous high and an illiquid moment in the markets contributed to the extremely volatile move, with the yellow metal now trading back around the previous record highs.

Bitcoin at 19-month high

Bitcoin is also enjoying a strong start to the week, breaking above $40,000 and up more than 7% on the day.

A 19-month high and backed by excitement over an ETF approval, which has been a long time coming. And we still don’t quite know when it will, but there’s a strong belief it will and soon.

 

Craig Erlam is Senior Market Analyst, UK & EMEA at OANDA

Opinions are the author’s, not necessarily that of OANDA Global Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.