<p>UPCOMING
EVENTS:</p><p>Tuesday: RBA
Policy Decision, Fed Chair Powell speaks.</p><p>Thursday: US
Jobless Claims.</p><p>Friday:
University of Michigan Consumer Sentiment.</p><p>What an end
of the week it was last Friday. The <a target=“_blank“ href=“https://www.forexlive.com/news/us-nonfarm-payroll-517k-vs-185k-estimate-unemployment-rate-34-vs-35-estimate-20230203/“ target=“_blank“ rel=“follow“>labour
market report</a> showed 517K jobs added vs. 185K expected, which is almost
double even the most optimistic forecasts. The unemployment rate came in at
3.4% vs. 3.6% expected, which is the lowest since May 1969. People rushed to
call it “too good to be true”, maybe it is but recent beats in <a target=“_blank“ href=“https://www.forexlive.com/news/us-december-jolts-job-openings-1101m-vs-1025m-expected-20230201/“ target=“_blank“ rel=“follow“>Job
Openings</a> and <a target=“_blank“ href=“https://www.forexlive.com/news/us-weekly-initial-jobless-claims-183k-versus-200k-estimate-20230202/“ target=“_blank“ rel=“follow“>Jobless
Claims</a> are testimony of the extremely tight labour market.</p><p>Later on
that day, we got another big beat in the <a target=“_blank“ href=“https://www.forexlive.com/news/ism-us-nonmanufacturing-pmi-index-552-versus-504-estimate-20230203/“ target=“_blank“ rel=“follow“>ISM
Services PMI</a> report, which bounced back strongly from the contractionary
territory to 55.2 vs. 49.2 in the previous month. New orders sub-index, which
is a proxy for demand, went from expansion to contraction in the previous
report to expansion again with the latest one. Looks like the easing in
financial conditions sparked immediately a reacceleration in economic activity.
</p><p>This is
something that will make the Fed’s job much trickier going forward as they try
to bring inflation back to their 2% target while getting close to their
projected pause. If this trend is to continue, we may see not only a “higher
for longer” policy, but a “higher-er for longer” one. The market had a quick
rethinking on Friday and is repricing its future interest rates expectations.
The <a target=“_blank“ href=“https://www.tradingview.com/chart/CIPuZN0R/“ target=“_blank“ rel=“follow“>2 year note’s yield</a>,
which is more sensitive to Fed’s policy, jumped by more than 20 bps and
reversed completely the drop seen in the aftermath of the FOMC Policy Decision.
The market’s expectation for the terminal rate also rose to 5.04% vs. 4.90% before
Friday. </p><p>The US
Dollar gained across the board on Friday, and given the Friday’s data, we
should see some repricing going forward. Technically, the swing support at
101.25 held and we may see a run to the 108.00 level.</p><p>Tuesday: The RBA is
expected to hike by 25 bps bringing its cash rate to 3.35%. The central bank is
expected to reiterate its willing to increase rate further and be data
dependent until inflation is seen returning to their 2-3% target band. As a
reminder, recent inflation data surprised to the upside with the Y/Y figure
coming at 7.8% vs 7.5% expected.</p><p>The market
will focus more on Fed Chair Powell and see what he has to say about the recent
huge beat in the labour market report. There will also be other Fed speakers
throughout the week.</p><p>Thursday: Given the
focus on the labour market, the US Jobless Claims is something to keep an eye
on. We saw beats after beats in the data and the big surprises on either side may
be market moving. The expectation for Initial Claims is 194K. </p><p>Friday: The
University of Michigan Consumer Sentiment survey is expected to tick up again
to 65.0 from the prior 64.9 in January. The market will keep an eye on
inflation expectations data in the report. </p><p>This article
was written by Giuseppe Dellamotta.</p>
EVENTS:</p><p>Tuesday: RBA
Policy Decision, Fed Chair Powell speaks.</p><p>Thursday: US
Jobless Claims.</p><p>Friday:
University of Michigan Consumer Sentiment.</p><p>What an end
of the week it was last Friday. The <a target=“_blank“ href=“https://www.forexlive.com/news/us-nonfarm-payroll-517k-vs-185k-estimate-unemployment-rate-34-vs-35-estimate-20230203/“ target=“_blank“ rel=“follow“>labour
market report</a> showed 517K jobs added vs. 185K expected, which is almost
double even the most optimistic forecasts. The unemployment rate came in at
3.4% vs. 3.6% expected, which is the lowest since May 1969. People rushed to
call it “too good to be true”, maybe it is but recent beats in <a target=“_blank“ href=“https://www.forexlive.com/news/us-december-jolts-job-openings-1101m-vs-1025m-expected-20230201/“ target=“_blank“ rel=“follow“>Job
Openings</a> and <a target=“_blank“ href=“https://www.forexlive.com/news/us-weekly-initial-jobless-claims-183k-versus-200k-estimate-20230202/“ target=“_blank“ rel=“follow“>Jobless
Claims</a> are testimony of the extremely tight labour market.</p><p>Later on
that day, we got another big beat in the <a target=“_blank“ href=“https://www.forexlive.com/news/ism-us-nonmanufacturing-pmi-index-552-versus-504-estimate-20230203/“ target=“_blank“ rel=“follow“>ISM
Services PMI</a> report, which bounced back strongly from the contractionary
territory to 55.2 vs. 49.2 in the previous month. New orders sub-index, which
is a proxy for demand, went from expansion to contraction in the previous
report to expansion again with the latest one. Looks like the easing in
financial conditions sparked immediately a reacceleration in economic activity.
</p><p>This is
something that will make the Fed’s job much trickier going forward as they try
to bring inflation back to their 2% target while getting close to their
projected pause. If this trend is to continue, we may see not only a “higher
for longer” policy, but a “higher-er for longer” one. The market had a quick
rethinking on Friday and is repricing its future interest rates expectations.
The <a target=“_blank“ href=“https://www.tradingview.com/chart/CIPuZN0R/“ target=“_blank“ rel=“follow“>2 year note’s yield</a>,
which is more sensitive to Fed’s policy, jumped by more than 20 bps and
reversed completely the drop seen in the aftermath of the FOMC Policy Decision.
The market’s expectation for the terminal rate also rose to 5.04% vs. 4.90% before
Friday. </p><p>The US
Dollar gained across the board on Friday, and given the Friday’s data, we
should see some repricing going forward. Technically, the swing support at
101.25 held and we may see a run to the 108.00 level.</p><p>Tuesday: The RBA is
expected to hike by 25 bps bringing its cash rate to 3.35%. The central bank is
expected to reiterate its willing to increase rate further and be data
dependent until inflation is seen returning to their 2-3% target band. As a
reminder, recent inflation data surprised to the upside with the Y/Y figure
coming at 7.8% vs 7.5% expected.</p><p>The market
will focus more on Fed Chair Powell and see what he has to say about the recent
huge beat in the labour market report. There will also be other Fed speakers
throughout the week.</p><p>Thursday: Given the
focus on the labour market, the US Jobless Claims is something to keep an eye
on. We saw beats after beats in the data and the big surprises on either side may
be market moving. The expectation for Initial Claims is 194K. </p><p>Friday: The
University of Michigan Consumer Sentiment survey is expected to tick up again
to 65.0 from the prior 64.9 in January. The market will keep an eye on
inflation expectations data in the report. </p><p>This article
was written by Giuseppe Dellamotta.</p>
This article was written by ForexLive at www.forexlive.com.