A soft-looking set of US jobs data yesterday caused the US Dollar Index to decline to its lowest levels since early October. The significant decline in energy prices is likely to benefit the energy-importing currencies across Europe and Asia. Today, the German Ifo may underperform in accordance with the local PMI releases, and a speech from the Fed’s Waller could have a significant impact.
The simultaneous release of October and November jobs data yesterday did not change the Federal Reserve’s perspective that the risks facing the US labor market lean towards the downside. The increase in the unemployment rate to 4.6% was significant. Chair Powell has indicated that data releases will be affected by the government shutdown, yet he has dedicated considerable attention to framing the unemployment rate as the most reliable indicator of the supply-demand imbalance in the US labor market. The 4.6% rate currently exceeds the median rate of 4.5% anticipated by FOMC members for the conclusion of 2025. The US yield curve experienced a modest decline of 2 basis points following the announcement. While it may not be a game changer, there remains sufficient optimism that the Fed could implement further cuts in 2026.
Today, there is a lack of substantial US data; however, we will hear a speech regarding the economic outlook from Christopher Waller of the Federal Reserve. The scheduled time for his speech is 14:15. In light of the recent rate cut, there has been a notable inquiry regarding the relationship between US consumption and the soft labour market.
This raises the question of whether the Federal Reserve should consider further cuts or if the robust consumption trends will lead to an upward adjustment in the jobs market, suggesting a potential indefinite pause from the Fed. That question may very well remain unanswered following yesterday’s data, as October retail sales demonstrated notable strength. Waller’s speeches on the economic outlook have been significant in recent years, and should he lean towards a conclusion on this matter, it would prompt a market response.