Forex Today: A new year arrives, focus turns to US labor market data

Matías Salord FXStreet

An exciting beginning of the 2024 trading year is ahead. Next week, economic reports include the US and Canada Job Reports and inflation figures from the Eurozone. The FOMC will release the minutes of its latest meeting.

Here is what you need to know for next week:

The beginning of 2024 brings key economic reports that will influence monetary policy expectations from the Federal Reserve (Fed) and the European Central Bank (ECB). The action will commence on Tuesday as market functions return to normal after the holidays.

The focus regarding US data will be on the labor market, with the JOLTS Job Openings on Wednesday, followed by the ADP Employment Report and Jobless Claims on Thursday, and Nonfarm Payrolls on Friday. Additionally, the ISM Manufacturing and ISM Services reports are scheduled for release on Wednesday and Friday, respectively. Market participants will also closely scrutinize the FOMC minutes of the December meeting, which will be released on Wednesday.

Analysts at TD Securities on the Fed

A rapidly improving inflation outlook and the specter of rising real rates have led the Fed to start considering the case for policy easing in 2024. Powell alluded to this possibility at the Dec FOMC, but Fed officials since then have pushed back on the idea of imminent easing. We expect the minutes to unveil that the FOMC is not entertaining the case for rate cuts just yet.

After Santa's rally, a new challenge emerges on Wall Street. Stocks finished the year 2023 with solid gains, reaching record highs. The question is whether this momentum can hold next week or if it is time for a correction.

US Dollar price this week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Swiss Franc.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		-0.36%	-0.30%	-0.46%	-0.54%	-1.13%	-0.72%	-1.96%
EUR	0.46%		0.09%	0.02%	-0.11%	-0.74%	-0.26%	-1.49%
GBP	0.43%	-0.14%		0.11%	-0.22%	-0.86%	-0.24%	-1.79%
CAD	0.46%	-0.22%	0.10%		-0.34%	-0.67%	-0.09%	-1.64%
AUD	0.54%	0.13%	0.19%	0.08%		-0.65%	-0.16%	-1.63%
JPY	1.12%	0.80%	0.65%	0.95%	0.62%		0.62%	-0.96%
NZD	0.71%	0.30%	0.43%	0.25%	0.14%	-0.49%		-1.17%
CHF	2.11%	1.46%	1.47%	1.62%	1.63%	0.96%	1.25%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

The US Dollar Index (DXY) posted its third consecutive weekly loss as market participants continued to anticipate Fed rate cuts in the coming year. It managed to end far from the bottom, around 101.20, after a rebound on Thursday and Friday led by a modest rebound in US yields. The DXY maintains a bearish bias and is likely to test the 100.00 level. However, t positive US data could potentially trigger a sharp rebound.

EUR/USD hit a fresh monthly highs above 1.1100, but then pulled back towards 1.1050. It posted its third consecutive week of gains, but the upward movement is losing momentum. On Wednesday, the final Manufacturing PMI will be released, and on Thursday, the final Service PMI. The crucial data for the week will be on Friday, with Eurostat releasing the Eurozone preliminary December Consumer Price Index (CPI). The preliminary figures from Spain are a good omen. Spain's Consumer Price Index slowed to 3.1% in December from a year ago, which was below the market consensus of 3.4%. The core rate also eased to 3.8%, the lowest since March 2022.

USD/JPY posted the lowest weekly close since July and suffered the biggest monthly loss in a year. The pair dropped towards 140.00 on expectations that the Fed will cut rates next year while the Bank of Japan (BoJ) is expected to exit its negative interest rate policy.

GBP/USD failed to hold above 1.2800 and retraced. Gains appear limited while trading below that level. EUR/GBP briefly surpassed 0.8700 before pulling back towards 0.8650.

The Chinese PMI data next week could be important for risk appetite and the Australian and New Zealand currencies. AUD/USD recorded its sixth weekly gain out of the last seven weeks and is holding above the 100-week Simple Moving Average (SMA). The pair closed the week around 0.6830.

USD/CAD fell below the 100-week SMA and is testing strong support around 1.3100. Canada will release the employment report on Friday.

And the currency of the year is…

The Mexican Peso and the Colombian Peso were the best performers in 2023. On the other hand, the Argentine Peso, the Turkish Lira, and the Russian Ruble fared the worst.

Among G10 currencies, the Swiss Franc performed the best. USD/CHF had its worst year in a decade. Despite seeing a recovery during the fourth quarter, the Japanese Yen suffered the main losses. USD/JPY rose for the third consecutive year but respected the 152.00 barrier. The outlook for the Yen appears to have improved compared to 12 months ago.

This is the last Forex Today for 2023. Wishing you a Happy New Year and a prosperous year ahead. Thank you!

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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