During today's Asian trading, the US dollar consolidated against major currencies as market participants took a wait-and-see attitude ahead of the Fed meeting. Geopolitical tensions in the Middle East were also in focus.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose by 0.01% to 103.43. Since the beginning of January, the index has increased by 2.02%, as stronger than expected US data has weakened the likelihood of easing the Fed's monetary policy. According to the CME FedWatch Tool, markets see a 47.7% probability of a 25 basis point rate cut at the Fed meeting in March and a 89.0% probability of a rate cut in May. In 2024, futures traders now expect five rate cuts of 25 bps, although two weeks ago they expected six cuts. This week, investors' attention will be focused on the Fed meeting (to be held on Wednesday) and data on the US labor market (to be published on Friday). Economists expect Fed policymakers to keep the interest rate in the current range, although they will likely remove the reference to the expected "additional policy tightening" that was in their statement after meetings for most of last year. As for the data, the final 2023 jobs report was fairly unremarkable. Total employment rose by 216,000 in December, continuing a trend of slowing but steady monthly job growth. Hiring in the government, healthcare and leisure and hospitality industries continued to drive overall employment growth. Meanwhile, the unemployment rate remained stable at 3.7%, while average hourly wages rose 0.4% m/m, matching November's pace. Overall, the themes of improved supply, lower demand and general normalization of the labor market are likely to continue into January. Nonfarm payrolls are expected to increase by 173,000 in January. While job growth has held up surprisingly well recently, there are several signs of a further slowdown in the coming months. Overall, fewer industries are adding headcount each month, while job openings and hiring plans continue to decline. Economists also expect the unemployment rate to rise to 3.8% and average hourly wages to increase by 0.3%.
The Japanese yen rose 0.25% against the US dollar amid increasing geopolitical risks in the Middle East. Media reported that three U.S. service members were killed in an aerial drone attack on U.S. forces in northeastern Jordan near the Syrian border. This was the first deadly strike against the U.S. forces since the Israel-Hamas war erupted in October.