Markets remain under pressure as investors continue to weigh on the outlook of global central banks amid still-high inflation but at the same time, a pretty good labor market, especially in the US.
Data was released on Thursday that the number of new jobs and jobless claims in the US were significantly better than expected, with the former increasing to 235,000 in December and the latter falling to 204,000. This is a very unpleasant picture for the stock market as it means that despite the aggressive rate hikes last year, the labor market is still strong, indicating that people with jobs are still spending money, which could very likely slow down the decline of inflation. And since the Fed has prioritized the need to fight this issue, there is a risk that rates will continue to increase, perhaps even higher than the levels proposed by the bank at the December meeting.
For now, the markets expect a pause after the central bank raises rates by 0.25% in February, but the upcoming labor market data might change all that. If the report shows a higher increase in new jobs in the US, another collapse will be seen in the US stock market. But if the figures are the same or worse than expected, the central bank may consider the possibility of ending the rate increases, which will be positive for the market.
Conversely, the effect of this data will be stronger in which it could cause a further collapse in the stock market if next week's inflation data shows a slowdown or a slight increase. But if the figure comes in below expectations, there will be a noticeable surge in demand for equities, accompanied by the weakening of the dollar and a rise in both gold and oil prices.
Forecasts for today:
EUR/USD
The pair is trading above 1.0505. It will drop to 1.0445 if the US reports better-than-expected employment data.
USD/JPY
The pair is trading around 134.45. A break above this level will push the quote to 137.20.
