- The US NFP added a further 353,000 jobs in January 2024 and the unemployment rate remained at 3.7% for a third consecutive month.
- McDonald’s Earnings Report disappointed investors due to the lower revenue figure. Whereas Caterpillar rose more than 4% after beating earnings expectations.
- Pound holders are contemplating if the regulator will become more dovish after receiving a vote to cut rates. The Bank of England has not been more split in their decision since the 2008 banking crisis.
- Fed members believe interest rates will be cut by 0.75% in 2024 according to the Chairman Powell’s latest interview.
USA500
The price of the USA500 continues to trade in a sideways price range as traders continue to evaluate the consequences of Friday’s employment data. The price range provides traders with breakout levels at $4,942 and $4,954. If a bearish breakout is formed, traders should take into consideration the asset is trading above the current trendline.
The SNP500 is being influenced by earnings reports from companies such as McDonald’s, Caterpillar and Vertex Pharmaceuticals. McDonald’s stocks fell by more than 2% after the company failed to beat Revenue expectations. According to the report the company fell short due to the middle-east crisis and a slowdown in China. Vertex Pharmaceuticals is yet to release their company earnings but the stock has risen 0.86% in this morning’s futures trading indicating shareholders are expecting a positive report.
The real winner from today’s earnings data is Caterpillar, which rose 4.49% before trading hours. The stock rose due to the company beating the expected Earnings Per Share by more than 10%. Caterpillar is the 50th most influential stock within the index holding a weight of 0.38%.
The question for investors is if the stronger employment data from Friday would support the asset as it indicates higher consumer demand and a soft-landing outcome. The second scenario is the higher employment data indicates higher inflation and consequently high interest rates for longer. The employment sector added a further 353,000 jobs in January 2024 and the unemployment rate remained at 3.7% for a third month. Salaries also rose at their fastest pace in over 12 months.
GBPJPY
The GBPJPY witnessed a significant downward trend last week but managed to correct back upwards. Nonetheless, the price has witnessed a downward tilt since the 19th of January and is trading below the “neutral” level on most indicators. No major economic releases are upcoming for the Pound. However, the Japanese Yen will be influenced by the Average Cash Earnings and Household Spending schedule for tonight’s Asian Session.
The Pound during the European session and as we edge towards the US open is declining against all currencies. Within the UK Monetary Policy Committee, comprising nine members, one voted for a 0.25% cut for the first time since March 2020. Moreover, only 2 members advocated for a hike, compared to 3 previously seen as hawkish. If the central bank adopts a more dovish stance, it could negatively impact the Pound, given the persistently high inflation and subdued consumer demand in the UK.
Dr Swati Dhingra was the member which voted for a cut. Dr Dhingra says that the decision was made because she holds the belief that the current policy is restrictive enough. Raising rates further would impose hardships on low-income individuals and even some middle-class families. As a result, economic growth remains poor. For example, the Japanese economy in the latest 3 quarters grew 1.4%. The UK economy recorded growth of 0.2%. However, according to analysts, for the Japanese Yen to experience considerable gains against the Pound, the Bank of Japan will need to move away from negative rates. In addition to this, a weaker Dollar, which is a competitor for the Yen, would support bearish price action.