NFP Predictions & Market Opportunities

What’s The Price?
This Week’s Key FX Prices

A slower and calmer week to bring in the new year, which I think for most is a nice breathe of fresh air. USD looks to be the big mover last week, keeping a close eye moving into Jan.

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This Week In FX
Jobs Data In Focus - NFP

The first big jobs report of the year drops Friday (January 10), so mark your calendars! Early predictions say December non-farm payrolls probably climbed by 153k, with guesses ranging from a chill 125k to a solid 200k. Expect those numbers to get more locked in as the week unfolds, thanks to upcoming reports like job openings, ADP private payrolls, and the ISM employment breakdowns. The unemployment rate is likely holding steady at 4.2%, while wage growth remains a steady 4% year-on-year—classic "cooling job market" vibes.

Now, after 100 basis points of Fed rate cuts in 2024, the buzz is that 2025 is shaping up to be a bit of a snoozer in terms of aggressive moves. The Fed’s December dot plot hinted at just two modest 25bp cuts this year. Meanwhile, traders are barely pricing in a move for the January 29 FOMC meeting, with only 3bp baked in and 15bp by March.

We’re in team “no change” for this month, but we’re still calling for a 25bp cut in March.
Here’s the kicker: while the Fed’s been dialing down the policy rate, longer-term borrowing costs have been skyrocketing, thanks to concerns over government debt and sticky inflation. This steepening yield curve is making mortgage rates and corporate borrowing costs soar, and the dollar? Oh, it’s flexing hard, hitting its strongest level in over two years against key trading partners. All these factors are putting the brakes on economic activity, and the Fed might feel the need to step in and ease things up a bit. Buckle up—it’s going to be a fascinating ride! 🚀

Will the Dollar react bullish or bearish?

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Market History Flashback
2021: U.S Capitol Riots

While the world’s attention was glued to the chaos unfolding at the U.S. Capitol, financial markets displayed a striking level of resilience. Despite the historic nature of the events, which highlighted deep political and societal divisions in the U.S., Wall Street largely shrugged it off.

What Happened in the Markets?

• The Dow Jones Industrial Average rose by 437 points (1.44%), closing above 30,800 for the first time.

• The S&P 500 and Nasdaq Composite also finished higher, as investors focused on Democratic victories in Georgia’s Senate runoff elections, which tipped control of Congress.

Why the Market Stayed Calm:

1. Stimulus Expectations: With Democrats controlling both houses of Congress and the White House, investors anticipated larger fiscal stimulus packages, increased infrastructure spending, and a faster economic recovery from the pandemic.

2. Corporate Optimism: Markets were betting on a recovery-driven surge in corporate earnings, especially for sectors like technology, healthcare, and renewable energy.

3. The Federal Reserve’s Support: Traders remained confident in the Fed’s ultra-accommodative monetary policies, which had underpinned markets throughout the pandemic.

Beneath the Calm
However, the rally also highlighted an underlying disconnect. The political instability that shocked Main Street seemed to have little immediate effect on Wall Street’s upward momentum. This gap became a talking point for critics who argued that markets had become too detached from economic and social realities.

Key Events
Mark Your Calendars! 📅

Here are the main headlines for day traders to be weary of when trading this week.

View the full economic calendar on Trading Economics.

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