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Dollar Trades Heavy Into Non-Farm Payrolls

Treasury yields and the dollar are slipping, with this morning’s non-farm payrolls report expected to show the job market slowing in January – clearing the way for more easing talk from Federal Reserve officials.

Brace for whiplash price action. Statistical and weather-related factors could trigger a dramatic miss in the headline number, with the range of analyst estimates looking unusually wide – from 150,000 to 290,000 – and Bloomberg pointing out that a negative print is within the realm of possibility. Benchmark and population revisions could meaningfully lower trend rates, even if the underlying job market remains relatively stable.

Traders may ultimately choose to place bets on something even more flimsy: the narrative that could emerge from Jerome Powell’s ‘60 Minutes’ interview this Sunday. Some have speculated that the Fed chair – facing opposition from his colleagues on the rate-setting committee – wants to use the broadcast platform to rouse popular support for a March rate cut. We doubt that: as part of a highly specialized public institution, Powell has often expressed a desire to give the broader American public an understanding of how the economy is performing and what the Fed is trying to achieve. His message is unlikely to diverge materially from the one delivered during Wednesday’s post-decision press conference.

US equity futures are setting up for a positive open, buoyed by stronger-than-anticipated earnings from tech bellwethers Amazon and Meta, and by spectacular profit growth at Chevron and ExxonMobil. Amid a general lack of trading catalysts, the euro and pound are both up roughly a tenth of a percentage point against the greenback, while the Canadian dollar and Mexican peso are seeing modest gains, limited by softening oil prices. Both major global benchmarks look set to close out the week with the biggest loss since November as the prospect of a ceasefire between Hamas and Israel helps reduce embedded geopolitical risk premia.

Still Ahead


January’s services survey from the Institute for Supply Management should remain firmly in expansionary territory even as it exhibits the typical post-holiday case of Seasonal Affective Disorder. Markets expect the index to rise to 52.4 from December’s 50.6, but a softer reading wouldn’t come as a total shock – higher-frequency spending data has showed signs of slowing momentum. (10:00 EDT)

The Reserve Bank of Australia is highly likely to leave its cash rate unchanged in February, but could follow its global counterparts by shifting policy guidance in a more neutral direction after growth and inflation slowed in the fourth quarter of 2023. We suspect, however, that traders betting on a first cut in June or earlier will be disappointed – policymakers will need more evidence of a sustained downturn before moving into easing mode. (22:30 EDT)


The Bank of Mexico is overwhelmingly expected to stay on hold for a seventh straight decision, maintaining its benchmark rate at 11.25 percent. With January data out earlier in the day likely to show core inflation continuing its downward trajectory, officials could follow their developed-country counterparts in preparing markets for a slow and gradual easing cycle starting around the March meeting. The Federal Reserve’s shift into neutral should give policymakers some breathing room, but the all-clear for rate cuts hasn’t yet been sounded. (14:00 EDT)


A big disappointment in Canada’s January Labour Force Survey could have a significant impact on monetary policy expectations – and on the Canadian dollar. Markets lowered odds on a March rate cut after November and December gross domestic product estimates surprised to the upside in late January, but the jury is out on whether the economy is truly generating the kind of recovery that translates into increased demand for workers. A negative print could bring easing bets back into vogue and unravel the loonie’s recent gains. (08:30 EDT)

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