During today's Asian trading, the US dollar fell slightly against major currencies, continuing yesterday's decline and retreating from a 7-week high. The dollar was pressured by increased investor appetite for riskier assets amid favorable earnings from American companies. In addition, investors are adjusting their positions ahead of the publication of key data on the US labor market, which will help clarify the timing of the Fed's monetary policy easing.
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) fell by 0.07% to 102.98. Since the beginning of the week, the index has decreased by 0.4%. However, the situation may change after the publication of January employment data (at 13:30 GMT). The total number of employees increased by 216 thousand in December, continuing the trend of slowing but steady monthly job growth. Hiring in government, healthcare, and the leisure and hospitality industries continued to drive overall employment growth. Meanwhile, the unemployment rate remained stable at 3.7%, while the average hourly wage rose by 0.4% per month, in line with the November pace. Overall, the topics of improving supply, decreasing demand and general normalization of the labor market are likely to continue in January. It is expected that the nonfarm payrolls increased by 180 thousand, which is weaker than the December growth. While employment growth has held up surprisingly well recently, there are few signs of a further slowdown in the months ahead. Overall, fewer industries are increasing their headcount every month, and the number of vacancies and hiring plans continue to decline. In addition, initial applications for unemployment benefits remain low, but ongoing applications have increased, an indication that laid-off workers are finding it increasingly difficult to find new jobs. Economists expect the unemployment rate to rise to 3.8%, and the average hourly wage increased by 0.3%. If today's data turns out to be much weaker than forecasts, this may increase the likelihood of an earlier easing of the Fed's monetary policy. According to the CME FedWatch Tool, markets see a 36.5% probability of a 25 basis point rate cut at the Fed meeting in March and a 93.8% probability of a rate cut in May.
The Australian dollar rose 0.4% against the US dollar, as increased risk appetite offset Australian inflation data. The Australian Bureau of Statistics (ABS) said that producer prices rose by 0.9% q/q in the 4th quarter after an increase of 1.8% q/q in the 3rd quarter. Economists had expected price growth to accelerate to 1.9% q/q. It was the 14th straight period of growth amid high crude oil and energy prices. In annual terms, producer prices rose by 4.1% (the strongest growth since the 1st quarter of 2023) after an increase of 3.8% in the 3rd quarter. The latest change coincided with economists' forecasts.