January 3, 2024
Forex Daily Market Analysis: 3 Jan 2023
CURRENCIES:
- Key Reports This Week:
- JOLTs, ADP, and NFP reports released.
- Focus on understanding the impact of these reports on the market.
- Fed Chair Powell’s Dovish Stance:
- Assessing the dovishness of Fed Chair Powell at the recent FOMC meeting.
- Reevaluating market interpretation of Powell’s remarks based on the released meeting minutes.
- Rate Cut Expectations:
- Reviewing changes in expectations for US rate cuts.
- Initially anticipating 175 basis points, now reduced to 150 basis points.
- Upcoming Jobs Reports:
- November JOLTS job openings at 15:00 UK.
- December ADP report on Thursday at 13:15 UK.
- Latest US NFP report on Friday at 13:30 UK.
- Market Reaction to Rate Expectations:
- US dollar retaining gains from Tuesday amid reduced expectations of aggressive rate cuts.
- Recent tightening of rate expectations led to higher US bond yields and a boost in the US dollar.
- US Dollar Index (DXY) Overview:
- DXY chart displaying a bearish overall trend.
- Recent spike in response to rate expectations, nearing the reversal of a bearish pennant pattern from December.
- Potential Consolidation:
- Considering the possibility of a short consolidation period around current levels for the US dollar index
STOCK MARKET DAILY ANALYSIS:
Key events this today:
- Germany unemployment, Wednesday
- US FOMC minutes, ISM Manufacturing, job openings, light vehicle sales, Wednesday
- Richmond Fed President Tom Barkin — an FOMC voter in 2024 — speaks, Wednesday
- Market Overview:
- Bonds extended their decline, and stocks showed marginal movements.
- Traders anticipating key US data to validate interest-rate cut predictions for the year.
- Global Market Reaction:
- Europe’s Stoxx 600 and US futures relatively unchanged after Tuesday’s significant slump.
- US Treasury yields increased, with the 10-year bond rate up by three basis points.
- Dollar remained steady against its Group-of-10 peers, following its notable daily gain.
- Historical Significance:
- Combined global slump in stocks and bonds on Tuesday marked the most significant for a first full trading day since at least 1999.
- Traders adjusting expectations on Federal Reserve easing.
- Upcoming Data:
- Latest Fed minutes, manufacturing, and job openings data scheduled for Wednesday may provide insights into market trends.
- Market Sentiment and Uncertainty:
- Beginning of 2024 marked by a “risk retrenchment,” according to Vishnu Varathan, chief economist at Mizuho Bank.
- Uncertainty whether the recent market slump is a sustained correction or pre-NFP profit-taking.
- Asian Markets and China Tech Focus:
- Chinese tech shares down over 2% amid reports of a top official overseeing the gaming industry being removed in Beijing.
- Potential government efforts to address backlash against new regulations impacting the sector.
- Bitcoin and Oil:
- Bitcoin trading stronger for the fifth day, hovering around $45,000, amid expectations of US approval for a cryptocurrency ETF.
- Oil holding losses, influenced by a risk-off tone in markets and concerns about a conflict in the Red Sea.
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