**Forecasting the Upcoming Week: Fed Speak Likely to Keep Markets in Motion**
*Adapted from the original article by Matías Salord on FXStreet.*
As financial markets look ahead to another critical trading week, all eyes are on a series of scheduled speeches from U.S. Federal Reserve officials, as well as upcoming economic data that could offer key clues about the central bank’s next move. The FX market, in particular, stands poised to react, driven by changing expectations of future interest rate adjustments.
Following the release of the October Non-Farm Payrolls (NFP) report, which provided a softer-than-expected picture of the labor market, investors are increasingly anticipating a transition in the Fed’s policy stance. The week ahead promises to be eventful, with volatility likely across major currency pairs due to Fed forward guidance, inflation figures, and global monetary policy trends.
This article provides a detailed look into the key factors that will shape FX market dynamics in the upcoming week.
**Soft U.S. Jobs Report Signals a Shift in Labor Market Strength**
The October U.S. NFP report, released last Friday, delivered a mixed-to-soft picture of the U.S. labor market:
– Non-Farm Payrolls rose by 150,000, below market expectations and well short of the September print of 297,000.
– The unemployment rate edged up to 3.9 percent from 3.8 percent.
– Average hourly earnings increased just 0.2 percent month-over-month, marking a year-over-year rise of 4.1 percent, which is the slowest pace since mid-2021.
Notably, this softer labor market data reinforces the idea that the U.S. economy is cooling modestly, reducing the immediate need for further rate hikes. Market sentiment reflected this shift:
– Treasury yields fell sharply post-report, with the 10-year yield dropping closer to 4.5 percent.
– The U.S. Dollar Index (DXY) saw renewed downward pressure as markets recalibrated expectations for future Fed actions.
The labor report did not alter the broader view that the U.S. economy remains on a stable footing, but it did solidify market consensus that the Fed is done with its tightening cycle. The question now shifts to when the first rate cut might come, and upcoming macroeconomic indicators will be central in guiding those expectations.
**Fed Officials Prepare to Speak: Markets Ready to Listen Closely**
A dense calendar of appearances by Federal Reserve officials awaits in the coming week. Each speech has the potential to sway market expectations, particularly as recent data has given investors reasons to believe that policy tightening may have peaked.
Speakers include:
– Chair Jerome Powell
– Vice Chair Philip Jefferson
– New York Fed President John Williams
– San Francisco Fed President Mary Daly
– Governor Lisa Cook
In these speeches, markets will be paying attention to several themes:
– Will Fed officials validate the prevailing market consensus that rate hikes are behind us?
– Could any of them hint at the possibility of rate cuts in 2024?
– How do they interpret recent labor market softness and evolving inflation dynamics?
Fed commentary will be especially relevant after last week’s FOMC meeting, at which the central bank held rates steady, signaling a data-dependent path forward.
Chair Powell is expected to be cautious, neither signaling immediate easing nor committing to further tightening unless inflation unexpectedly re-accelerates. Investors will be dissecting his comments for any subtle shifts in tone, particularly around labor market assessments and inflation persistence.
**Key Economic Data to Watch This Week**
Beyond central bank commentary, the week is loaded with high-tier U.S. and global data releases that will impact currency markets. Among the most important:
– **U.S. Consumer Price Index (CPI):** October inflation data is due on Tuesday. A cooler reading could cement expectations of a Fed pause and bolster risk assets. Analysts expect:
– Headline CPI (YoY) to slow to
Read more on EUR/USD trading.