MHMarkets：2024.02.02 MHM European Time Analysis

Date: 2024.02.02 MHM European Time Analysis

Gold Price Consolidation:

The price of gold (XAU/USD) continues its sideways movement, remaining close to a one-month high reached recently. Traders are cautious and awaiting the release of US monthly employment data for insights into the Federal Reserve's policy direction, which could impact the non-yielding yellow metal. Ongoing talks of an Israel-Hamas ceasefire and positive global equity market sentiment act as challenges for gold.

Australian Dollar Resurgence:

The Australian Dollar (AUD) is on an upward trend, recovering from a three-month low. Mixed US economic data and improved Producer Price Index (PPI) figures support the AUD/USD pair. The Australian money market is strengthening the Aussie Dollar, with expectations that the Reserve Bank of Australia (RBA) will maintain the interest rate at 4.35% in its February meeting.

US Dollar Dynamics:

The US Dollar Index (DXY) faced losses due to mixed economic data, impacting Treasury yields. The upcoming Nonfarm Payrolls (NFP) report is highly anticipated, with expectations of 180,000 job additions and a rise in the Unemployment Rate to 3.8%. This data holds significance for the timing and pace of potential Federal Reserve interest rate cuts in 2024.

Federal Reserve's Stance:

Following its recent meeting, the Federal Reserve kept benchmark interest rates unchanged, adopting a slightly hawkish tone. Fed Chair Jerome Powell hinted at a cautious approach to rate cuts, impacting market expectations. The probability of a March rate cut declined, but markets now see a 90% chance of a rate cut in May.

Japanese Yen and US Dollar Dynamics:

The Japanese Yen (JPY) remains in a narrow range against the US Dollar (USD) amid optimism surrounding a potential Gaza ceasefire. The USD stays depressed due to expectations of future interest rate cuts by the Federal Reserve. The USD/JPY pair is influenced by US Treasury bond yields and awaits the release of the Nonfarm Payrolls (NFP) report for clearer direction.

What to expect in todays Nonfarm Payrolls report？

The upcoming Nonfarm Payrolls (NFP) report, crucial for US economic insights, with expectations of 180,000 jobs added in January 2024, a decrease from December's 216,000. The unemployment rate is anticipated to slightly rise from 3.7% to 3.8%, with average hourly earnings expected to maintain a 4.1% year-over-year increase. This labor market data is pivotal in influencing the Federal Reserve's (Fed) decisions on interest rate cuts this year, especially after recent indications against a March rate cut. The Fed maintained its benchmark rates at 5.25% to 5.50%, signaling a cautious approach towards reducing rates until more confident of achieving a sustainable 2% inflation target. Market expectations for a March rate cut have decreased, but there's a 90% chance seen for a cut in May. Additionally, private sector employment gains were reported at 107,000 in January, falling short of the 145,000 expected. This upcoming report and its nuances, including adjustments to seasonal factors, will be closely monitored for their implications on monetary policy and the US dollar's trajectory.