Today’s markets analysis on behalf of Konstantinos Chrysikos Head of Customer Relationship Management at Kudotrade
The US dollar was broadly steady on Wednesday, as investors adopted a cautious stance ahead of a busy slate of US economic data that could further shape expectations for Federal Reserve policy.
Market focus is firmly on today’s releases of the ISM Services PMI and the JOLTS job openings report. The services PMI is expected to edge slightly lower to 52.3, while job openings are forecast to decline to around 7.64 million. These figures will be followed by weekly initial jobless claims on Thursday and the closely watched December nonfarm payrolls report on Friday. Evidence of slowing economic momentum or further softening in the labour market could weigh on the dollar and yields.
Earlier this week, the ISM Manufacturing PMI pointed to the sharpest contraction in US factory activity since 2024, reinforcing concerns that growth momentum is losing steam. Against this backdrop, mixed remarks from Federal Reserve officials failed to move markets materially. Fed Governor Stephen Miran reiterated on Tuesday that interest rates may need to be cut more aggressively this year to sustain economic momentum. Conversely, Fed member Neel Kashkari struck a more cautious tone.
Markets are currently pricing in more than an 80% probability that the Fed will leave interest rates unchanged at its upcoming policy meeting. However, the Fed is expected to deliver two rate cuts this year, although there is some uncertainty regarding the timing of the cuts.