**FX Today: US Economic Data in the Spotlight as Markets Assess Fed Policy and Global Trends**
*Adapted and Expanded from an article by Anil Panchal for FXStreet*
As financial markets open a new trading week, global investors remain heavily focused on key economic signals out of the United States. With Federal Reserve policy decisions closely tied to economic performance, data releases are steering sentiment, influencing the US Dollar (USD), and rippling across major currency pairs, commodities, and equities.
Here’s a comprehensive look at recent developments in the Forex market, expanding on insights provided in Anil Panchal’s original article from FXStreet, and integrating additional context from current market analysis.
## Mixed Data Keeps Traders Guessing on the Fed’s Next Move
Last week’s volatility spilled into Monday as markets grapple with conflicting signals from recent US economic data. Nonfarm Payrolls (NFP) reported stronger-than-expected job growth for December, with 216,000 jobs added, exceeding the forecast of around 170,000. However, this was tempered by increases in unemployment among part-time and marginalized groups and a downward revision of previous months’ data.
Investors remain divided on how the Federal Reserve will interpret these developments:
– **Labor Market Resilience**: Headline job creation numbers suggest the economy is still strong, potentially delaying interest rate cuts.
– **Slower Job Growth in Some Segments**: A drop in temporary help services and lower labor participation may indicate underlying weakness.
– **Wage Inflation**: Average hourly earnings rose 0.4% month-over-month, higher than expected, signaling potential inflationary pressure.
These mixed signals come at a particularly sensitive moment, as traders seek clarity on when—or even if—the Fed will start cutting rates in 2024. Current CME FedWatch data suggests the probability of a rate cut in March has decreased from over 70% in December to around 58% now.
## US Dollar Stays Firm Amid Rate Cut Debate
The US Dollar held firm to start the week, drawing support from the resilient employment data while dollar bears were pushed to the sidelines, awaiting fresh clues from upcoming economic releases.
– The **US Dollar Index (DXY)**, which measures the USD against a basket of major currencies, hovered near the 102.30 mark on Monday, maintaining a modest upward trajectory.
– Investors are eyeing **Consumer Price Index (CPI) data** on Thursday and **Producer Price Index (PPI)** on Friday for further confirmation of inflation trends.
– **Federal Reserve speak** will also be crucial, with multiple policymakers scheduled to make remarks through the week, including Fed Governor Michelle Bowman and New York Fed President John Williams.
Cautious optimism that inflation is moving closer to the 2% Fed target needs to be balanced against signs of persistent wage growth and labor market strength that could keep rates elevated longer than anticipated.
## Currency Movers: Major Forex Pairs in Focus
### EUR/USD Stalls Near 1.0950
The euro struggled to advance against the US dollar, repeatedly running into resistance around 1.0950 and retreating toward 1.0920 by the session close.
– **Eurozone data** has been underwhelming, with German industrial production falling in November, pointing to persistent weakness in Europe’s largest economy.
– The **European Central Bank (ECB)** remains cautious, with officials, including President Christine Lagarde, emphasizing that rate cuts are not imminent despite disinflationary pressures.
Market sentiment suggests the ECB may begin to ease in mid-2024, but traders are more focused on the US for near-term USD direction.
### GBP/USD Capped Below 1.2750
The British pound showed some gains early Monday but was unable to break above key resistance at 1.2750. Sterling strength has been muted in recent sessions as the Bank of England maintains a wary outlook.
– Concerns about sticky UK inflation limit expectations for early rate cuts.
– Sluggish
Read more on USD/CAD trading.