• Premature easing of financial conditions could allow demand to pick back up
• If we don’t maintain sufficiently tight conditions, there is a risk inflation will pick back up, reversing progress
• Appropriate to consider parameters to guide decision to slow Fed’s balance sheet runoff
• Labor market ’still tight‘ but continues to rebalance
• Financial system overall has ‚more than ample‘ bank reserves and liquidity, though no longer ’super abundant‘
• Inflation in a ‚much better place‘ than last January but Fed’s job is not yet complete
• We should slow the pace of asset runoff as the Fed’s overnight reverse repurchase balances approach a low level

The Fed’s repo balances should approach a low level around mid-year so we should start to hear more talk about slowing the pace of runoff soon, though I don’t think it will be much of a factor for markets (though others disagree).

Overall, Logan doesn’t sound like someone who is even close to supporting a rate cut.

This article was written by Adam Button at www.forexlive.com.

• US November non-farm payrolls +216K vs +170K expected
• US December ISM services 50.6 vs 52.6 expected
• Canada December employment 0.1K versus 13.5 K estimate
• Non-farm payrolls reactions: Objects in the rear-view mirror may not be as they seem
• US Factory orders for November 2.6% vs 2.1% estimate
• SEC asked bitcoin ETF issuers to submit final versions of key docs as soon as today
• Fed’s Barkin: Labor market fees like it’s moving in a steady, softening pattern
• Baker Hughes oil rig count up 1
• Timiraos: Dec non-farm payrolls „doesn’t change much of anything for the central bank“
• Yellen: What we’re seeing now can be described as a soft landing

Markets:

• WTI crude oil up $1.74 to $73.93
• US 10-year yields up 6 bps to 4.05%
• Gold up $1 to $2044
• GBP leads, CAD lags
• S&P 500 up 0.2%

Looking at the closing changes in FX, you might be excused for thinking nothing happened today but it was certainly the opposite. The US dollar hit the highs in the moments after non-farm payrolls on a strong headline and lower unemployment but a deeper dive into the data showed it wasn’t quite as strong as it looked. That started a retracement that further extended when ISM services missed.

However the bond sellers weren’t ready to give up and the initial risk-positive move and USD selling on ISM didn’t last. As the day wore on, the mood worsened and the dollar improved.

Ultimately, that left FX and equities right back to where they started the day.

This article was written by Adam Button at www.forexlive.com.

I continue to believe a bitcoin ETF is a done deal with a launch likely next week.

The latest report comes from Bloomberg and cites four people familiar who say the SEC told several issueers that they should submit a final version of a key listing document as soon as today.

Two of the sources said staff had no additional feedback on the paperwork.

The report says SEC commissioners are expected to vote on the filings next week.

We’ve seen many reports this week saying it’s a done deal and yet the price of bitcoin hasn’t responded positively, which makes me think that people are front-running the sell-the-fact trade. Bitcoin has rallied to $45K from $30K largely on hopes for an ETF approval.

This article was written by Adam Button at www.forexlive.com.

Closing changes on the day:

• S&P 500 up 0.2%
• DJIA +0.1%
• Russell 2000 -0.2%
• Nasdaq Comp +0.1%
• Toronto TSX Comp +0.2%

Closing changes on the week:

• S&P 500 down 1.5%
• DJIA -0.6%
• Russell 2000 -3.6%
• Nasdaq Comp -3.25%
• Toronto TSX Comp -0.3%

Coming into this week, the S&P 500 and Nasdaq had rallied for nine straight weeks in a move that highlights the power of the Fed pivot. Some profit taking was probably delayed by the turn of the calendar but it arrived this week. Is there more to come? I could see the argument for that, especially because Fed funds have repriced rate cuts down to 137 bps.

For next week though, the big release will be December CPI. A soft number puts a March cut right back into play.

This article was written by Adam Button at www.forexlive.com.

• Consumer demand remains healthy, though slowing
• Labor market reacceleration at this point seems unlikely
• There is more uncertainty around the path of inflation given that progress over last six months has been so reliant on goods
• Companies still trying to raise prices; need to see how consumers and competitors react
• First quarter will be important given that businesses tend to mark up at the start of the year
• US still at a point where inflation is above target and employment is near max
• Labor market is ’normalizing nicely‘
• No problem ‚toggling‘ rate to more normal levels as you build confidence inflation is falling

I think there is some real insight in these comments. The ‚toggling‘ idea is like the Fed taking out insurance and moving down to around 4.00% if inflation stays low. The comment about Q1 pricing is an important one too, given how strong prices rose in Jan/Feb of last year.

This article was written by Adam Button at www.forexlive.com.

Maybe it was too much to expect a strong rebound on a soft ISM services number.

In the bigger picture, stocks are still on a nine-week winning streak, so that kind overbought momentum isn’t going to be cleaned up by four days of selling. That doesn’t necessarily mean the market needs to tank from here but we might need to see a dovish validation from the Fed to get there and maybe we track a bit lower in the meantime.

This article was written by Adam Button at www.forexlive.com.

Yesterday, the Dow Jones remained on the back foot
as the correction that began last week seems to have more room to go. As of
now, the data has been overall positive with the US ISM Manufacturing PMI beating
expectations and US Job Openings missing
forecasts. Moreover, yesterday we got a beat in the US ADP and US Jobless Claims data. If
the data remains positive, we can expect the market to bounce back once the
froth from the aggressive rate cuts expectations gets unwound. Today, is an
important day as we get the release of the US NFP and the US ISM Services PMI.

Dow Jones Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Dow Jones remains
in a negative mood amid a general stock market selloff. The level to watch is
the support around
the 37066 level where we can find the confluence of the
recent swing low and the 21 moving average. This is
where we can expect the buyers to step in with a defined risk below the support
to position for new highs. A break below the support would open the door for a
bigger drop into the 36030 level.

Dow Jones Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the
Dow Jones has been trading inside a rising channel but the price recently broke
out of it signalling a deeper correction to follow. We can also notice that the
latest leg higher diverged with
the MACD which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. If the price breaks below the 37066 level the reversal would be
confirmed and the 36030 level will be the next target.

Dow Jones Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action and the divergence with the MACD. Now it’s
just about waiting for the price to come into the 37066 support and see what
happens there as it’s likely to decide the direction for the next few weeks.

This article was written by FL Contributors at www.forexlive.com.

• Should not move towards confrontation because of differences
• Artificial decoupling is moving against the tide and losses outweigh gains
• The need for cooperation is not weakened, but stronger at this time
• No conflict between China and US is the most important peace dividend for the world
• Both sides should make use of foreign affairs, economy, finance to bolster relations

All this talk is mostly still just for show as both sides are not going to actually give in to make any real progress in strengthening ties. A lot of the relationship between the two countries is just for show. And while China has held strong leverage in the past, their recent economic struggles are not making it easy to portray such a strong front. Not only that, the outlook – especially on the demographics front in the next few decades – is one that could see China have to pick their battles wisely.

This article was written by Justin Low at www.forexlive.com.

European indices are down roughly 1% now as stocks are struggling to stay afloat once again. The push lower comes as 10-year Treasury yields are at session highs, up 4.7 bps to 4.038% as bond sellers look to validate a break above the 4% mark on the week. US futures are also struggling, gradually moving lower on the day with S&P 500 futures now down 0.3%:

All of this continues to keep the dollar underpinned with commodity currencies struggling at the moment. AUD/USD is down 0.4% to 0.6680 with the weekly drop now nearing 2%. This will mark six straight days of losses for the pair as it falls to a three-week low at the moment.

This article was written by Justin Low at www.forexlive.com.

• Prior +2.4%
• Core CPI +3.4% vs +3.5% y/y expected
• Prior +3.6%

Headline annual inflation may show a jump in price pressures but core annual inflation actually eased slightly further in December to 3.4%, down from 3.6% in November. As such, this still reaffirms the ECB’s case to remain in pause mode at least for the time being. However, if price pressures start to become stickier in and around the 3% mark, that may see policymakers struggle to sell any talk of an imminent pivot. So, we’ll see.

This article was written by Justin Low at www.forexlive.com.