U.S. Stocks Rise as Jobs Report Tempers Rate Outlook
U.S. stocks rallied as a cooling jobs report lowered the likelihood of an imminent rate hike from the Federal Reserve. This shift in sentiment is allowing traders to reassess their positioning, particularly in the FX market where softer jobs data generally supports risk assets. With USD losing ground, the focus is now on upcoming inflation reports that may determine the Fed's policy trajectory moving forward.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). The Wall Street Journal's view aligns more closely with the upper third — JPMorgan and ING share that framing.
How firms align
JPMorgan's stance supports the bullish sentiment reflected in the current market conditions, maintaining a target of 1.10 for the March 26 tenor. In contrast, BofA's more cautious outlook suggests vulnerabilities in the bullish push, with a target of 1.04 for the same tenor, indicating a mixed sentiment among top analysts.
What the data shows
Recent job data revisions underscore the softening labor market, leading to lowered Fed rate hike expectations. Market players should keep an eye on upcoming inflation data, which could further shape rate outlooks and, consequently, currency movements.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Softer jobs report reduces immediate Fed rate hike probabilities.
- 02Optimism in stocks correlates with increased risk-on sentiment in FX markets.
- 03Watch for inflation data as a potential catalyst for policy shift; levels may influence trades.
- 04USD faces pressure as carry trades become less favorable in current environment.
Market implications
Traders should monitor the 1.075 level in EUR/USD, as shifts above it could indicate stronger bullish momentum. Inflation data releases are on the calendar next week, serving as a crucial signal for potential policy adjustments.
Risks to this view
A resurgence in stronger-than-expected job numbers or robust inflation data could pivot sentiment, forcing a quick reassessment of Fed hike expectations and reversing current currency dynamics.
Sentiment by currency
USD EUR+JPY+GBP+Composite USD score: -0.60
Sources & References
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