Top of the Morning: Nov Jobs Report, Fed roundup, & the week ahead
At a Glance
The latest U.S. employment data suggests a continuing softening in the labor market, with November seeing a job addition of 227,000 versus a consensus of 220,000, but a rise in the unemployment rate to 4.2% indicates potential challenges ahead. Per the full note from UBS, the three-month average for job growth has improved to 173,000 from a low of 123,000 last month, but the overall trend seems to point towards moderation. As the Fed assesses this labor market backdrop while preparing for 2025, traders should be mindful of potential impacts on currency movements, especially in key pairs like USD/EUR.
Key Takeaways
- 01The November jobs report shows a slight rebound but with concerns regarding the unemployment rate.
- 02The Fed's policy approach in 2025 will likely be influenced by the softening labor market.
- 03Current market positioning reflects a balance of cautious optimism regarding USD strength.
- 04Expect currency movements to correlate with underlying employment trends and Fed communication.
Full Analysis
What the desk is arguing
The desk contends that the recent labor market data, while better than previous months, points to a nuanced and possibly deteriorating economic environment. In Mike Gord's evaluation, the job addition figure for November reflects a rebound but still embodies underlying risks, particularly with an uptick in the unemployment rate impacting overall confidence.
The reported increase in the unemployment rate and average hourly earnings in November could influence Fed policymakers' stance on interest rates moving forward. With unemployment rising slightly to 4.2%, and considering the recent volatility caused by strikes and weather events, this narrative aligns with the desk's positioning on the cautious outlook for the USD.
Where it sits in our coverage
Our current consensus target for the USD/EUR pair is 1.075, with a range between 1.04 and 1.12. Notably, both jpmorgan predicts a target of 1.10 for March 2026, while bofa takes a more bearish stance with a target of 1.04 during the same tenor.
The desk's call leans towards the central to upper end of the forecast range, reflecting a belief in the narrative of a softening job market influencing monetary policy adjustments.
How other firms see it
Aligned firms such as jpmorgan and others share a relatively optimistic view regarding a maintained USD strength, while bofa presents a contrary outlook anticipating possible weakening.
Expect movements around pairs like USD/EUR and USD/JPY, which are expected to reflect the evolving monetary landscape as influenced by the Fed's assessment of recent labor data.
What the calendar says
No significant upcoming economic events are scheduled for the next 30 days that would directly impact the labor market narrative or monetary policy signaling.
Market Implications
Watch for potential resistance levels around 1.075 in USD/EUR as traders digest the softening labor market signals. Any comments from Fed officials regarding monetary policy could further shape sentiment, especially concerning interest rates moving into 2025.
From the original
As we close out another trading week, Mike Gourd drops by to recap the latest employment data, along with the remarks from several Fed officials this past week, including those of Chairman Jerome Powell. Plus, a look at what investors should expect in the week ahead. Featured is
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In light of a stronger-than-expected December Employment Report, the desk views this labor market dynamic as a potential catalyst for continued USD strength. Per the full note, the report highlighted a non-Farm payroll increase of 256,000, significantly surpassing the consensus estimate of 163,000, signaling robust economic growth. This backdrop, coupled with a steady unemployment rate at 4.1% and average hourly earnings maintaining growth compatible with the Fed's inflation target, suggests that the Federal Reserve may stay on its current policy path, supporting the USD. The key question now remains how this will influence near-term positioning among institutional market participants.