The markets look to November Non-Farm Payrolls to greenlight another Fed cut
The November Non-Farm Payrolls data will be released on Friday, 6th of December, 2024.
Markets look for clarity after noisy October payrolls release
October’s Non-Farm Payrolls data highlighted uncertainty about the state of the U.S. labor market. The economy added just 12,000 jobs, significantly missing expectations of 113,000. While this represented the weakest gain since late 2020, the data appeared to reflect temporary disruptions rather than a definitive weakening trend. Strikes, particularly at Boeing, had shaved 46,000 jobs from manufacturing payrolls, and hurricane-related effects had likely exacerbated the slowdown. Meanwhile, the unemployment rate had remained steady at 4.1%, and wages had grown 0.4%6. These mixed signals left questions about whether the labor market was cooling or recovering from short-term shocks.
(Source: Trading Economics)
Economists expect signs of solid labour demand in November data
November’s Non-Farm Payrolls report is expected to show a significant recovery, with consensus forecasts pointing to a gain of around 200,000 jobs. A stronger-than-expected rebound would signal underlying economic growth remains resilient, despite signs of moderation earlier in the year, with an economy running at 2.8% GDP growth seemingly supporting labour demand. The unemployment rate is projected to edge up slightly to 4.2%, potentially reflecting an increase in labor force participation. Wage growth will be critical, as steady increases may signal sustained consumer spending power and broader economic momentum heading into 2024.
Markets position for a December Fed cut but outlook for 2025 is unclear
As of December 5, 2024, the CME FedWatch Tool indicates a 75% probability that the Federal Reserve will implement a 25 basis point rate cut at its upcoming December 17-18 FOMC meeting, reducing the federal funds target rate to a range of 4.50% to 4.75%. Recent statements from Federal Reserve officials suggest a cautious approach. Looking ahead to 2025, markets anticipate fewer rate cuts than previously expected, driven in part by the expected economic impacts of President Trump’s fiscal policies. A combination of tax cuts and deficit-financed spending, particularly on infrastructure, is likely to provide a near-term boost to economic growth. However, these policies may also sustain upward pressure on inflation and increase the federal deficit, prompting the Federal Reserve to adopt a more measured approach to monetary easing.
(Source: CME Group)
Non-Farm Payrolls could solidify Fed cut and equity bull market
If the November 2024 Non-Farm Payrolls data meets expectations, showing robust job gains and steady wage growth, it could solidify expectations for a December Fed rate cut. Such a move would likely boost market sentiment, driving further gains in U.S. equities, particularly tech stocks, which are sensitive to lower rates. The U.S. Dollar could retreat as rate-cut bets intensify, creating tailwinds for gold prices to rebound. Meanwhile, Bitcoin could capitalize on the improving risk appetite and weaker dollar, potentially surging beyond the $100,000 mark.
There is two-way risk heading into the data. Unexpected November payrolls data could trigger volatility. Weak data may boost rate-cut odds but fuel recession fears, pressuring equities and boosting gold. Strong data could dampen rate-cut hopes, lifting the U.S. Dollar, weighing on stocks and gold, and tightening liquidity.
NFP data could spark next move in USD/JPY
The next move in the USD/JPY could be determined by the Non-Farm Payrolls data. A number around or below expectations and the subsequent repricing for a December Fed cut could weaken the US Dollar, especially given expectations of a looming Bank of Japan hike in coming weeks. Such a downside surprise would open a potential retest of 149.50, a break of which could open a deeper drop into the 140s. However, an upside surprise in the Non-Farms data could boost the pair as Fed cut expectations are dialled back, with the most immediate resistance level around 151.20.
(Source: Trading View)
(Past performance is not a reliable indicator of future results)