USD: Mixed Signals from December Payrolls Report and the Anticipation of CPI Inflation

USD

A mixed payrolls report for December offered some contradictory signals: steady job creation and healthy wage growth in the establishment survey, contrasted with a sizable drop in labour force participation in the household one. Investors initially reacted to the strong December job creation number by sending the dollar higher, although the greenback quickly reversed course on realisation that the 71k downward revision to the October and November data more than made up for the upside surprise in the final month of the year. All in all, the US labour market continues to enjoy full employment, but signs of cooling are accumulating.

All this will be overshadowed by the key December CPI inflation report on Wednesday. A two-in-three chance of a March cut from the Federal Reserve currently priced in by markets still strikes us as too high, and this week's inflation number will go a long way towards settling the debate.

Enrique Díaz-Álvarez

Analyst at Ebury – a leading global fintech company specialized in international payments, collections, and foreign exchange services for SMEs and midcaps. Ebury offers foreign exchange activity in over 130 currencies as well as cash management strategies, trade finance, and FX risk management. Authorised and regulated as an electronic money institution. Regulary ranked among the top forecasters in Bloomberg's FX forecast accuracy rankings. Ebury analysts also provide financial market reports in Polish, available on FXMAG.PL.

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USD federal reserve cpi inflation wage growth US labor market cooling signs mixed signals job creation market anticipation.establishment survey household survey Full employment labor-force participation March cut December payrolls report

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USD

Enrique Díaz-Álvarez

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