United States: A March rate cut bites the dust

Wells Fargo Research Team Wells Fargo

Summary

United States: A March rate cut bites the dust

It was a busy week for economic data, but Friday's employment report stole the show. Nonfarm payrolls rose 353K in January, almost double the consensus expectation. While we suspect the Federal Reserve will put more weight on the Employment Cost Index's soft reading on labor cost growth in Q4, the pickup in average hourly earnings and overall strength in hiring suggest the odds of a rate cut in March are quickly fading.
Next week: ISM Services (Mon.), Trade Balance (Wed.), Consumer Credit (Wed.)

International: Eurozone inflation slows as growth remains at a standstill

Eurozone GDP was flat in Q4, while CPI inflation eased slightly further in January. As long as growth remains weak and inflation trends keep improving, we believe the European Central Bank could cut its policy rate as early as April. This week also saw monetary policy announcements from several other foreign central banks, which saw rate cuts delivered in Brazil, Chile, Colombia and Hungary and rates held steady in the United Kingdom and Sweden.
Next week: RBA Policy Rate (Tue.), Japan Labor Cash Earnings (Tue.), Banxico Policy Rate (Thu.)

Interest rate watch: FOMC removes “Bias” to tighten

As universally expected, the FOMC decided to make no changes to its monetary policy stance, keeping the fed funds target range at 5.25%-5.50% and maintaining the current pace of quantitative tightening. Importantly, the Committee removed its implicit “bias” to tighten policy further in its post-meeting statement.

Topic of the week: China's property crisis grows ever grander

On Monday, a Hong Kong court ordered the liquidation of Evergrande, China’s second-largest property developer, marking the most significant blow yet to China’s struggling real estate sector. China’s real estate crisis has intensified over the past couple of years, but challenges for the sector have been evident for some time.

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Wells Fargo Research Team

Wells Fargo

AUD/USD trims some losses, bounces back to 0.7150

AUD/USD has traded on the back foot on Monday, coming close to the 0.7100 mark before rebounding toward the 0.7150 region ahead of the opening bell in Asia. The Greenback’s solid performance has kept the risk complex under pressure, sending the Aussie to fresh monthly lows on the back of rising bets for a Fed rate hike this week. on Tuesday, investors are now expected to closely follow key data releases in China.

USD/JPY: Japanese Yen edges lower vs USD amid Middle East jitters as Fed, BoJ meetings loom

The USD/JPY pair attracts some buyers at the start of a new week and climbs closer to the 154.00 mark during the Asian session, reversing a part of Friday's losses. Spot prices, however, remain confined in a range held over the past week or so and within striking distance of a nearly seven-month low, touched last Tuesday, as traders await this week's key central bank events.

Gold retests $4,300; USD losses momentum

Gold picks up fresh upside traction and challenges the key $4,300 mark per troy ounce on Monday. The yellow metal, however, remain on the back foot on the back of marked gains in the US Dollar and rising US Treasury yields across the curve.

JasmyCoin: Upbit delisting raises risk of further losses

JasmyCoin shows signs of stability at the time of writing on Monday. However, the token remains constrained between support at $0.0035 and resistance at $0.0040. Since May, its technical structure has continued to deteriorate, with the price falling from highs of $0.0078. JASMY’s outlook suggests that bears have the upper hand as bulls fight to defend key support levels.

Will the Fed deliver the hawkishness markets are pricing in?

Fed hike bets increase after PPI and CPI reports. Updated dot plot to be crucial for the dollar’s reaction. Warsh’s independence faces test amid Trump’s pressure for lower rates. For the Dollar to extend gains, Fed needs to satisfy current hawkish bets.

Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight

The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.