Synopsis:

This week, FX investors will closely watch key US labor market data, Fed speeches, and the December FOMC minutes for insights into monetary policy and USD direction.

Key Points:

• US Economic Data:

  • Non-farm payrolls, services ISM, JOLTs, ADP, jobless claims, and University of Michigan Consumer Sentiment are central to gauging labor market trends.
  • Factory and durable goods orders, along with final services and composite PMIs for December, are expected today.

• Fed Commentary:

  • Speeches from Fed officials, including Thomas Barkin, Christopher Waller, and Michelle Bowman, will be pivotal, especially after the hawkish tone of the December FOMC meeting.
  • December FOMC minutes may reveal internal sentiment on future rate cuts and the extent of policy caution.

• Market Expectations:

  • Credit Agricole’s US economist anticipates signs of renewed labor market cooling, which could weigh on the USD.
  • A key risk for the USD lies in potential signals of broader FOMC support for a cautious easing stance.

Conclusion:

As FX markets digest labor data and Fed commentary, any dovish cues from policymakers or evidence of labor market cooling could pressure the USD in the near term.