Market Analysis by Quasar Elizundia, Expert Research Strategist at Pepperstone
January 10, 2025 –
“Following a trading pause in U.S. equity markets in commemoration of former President Jimmy Carter, investors’ attention now shifts to the release of the December Nonfarm Payrolls (NFP) report. This key macroeconomic data arrives at a critical juncture, with expectations of a slowdown in job creation compared to the previous month.
Forecasts indicate an increase of approximately 160,000 jobs, down from the 227,000 reported in November, a figure boosted by the post-hurricane job recovery. If this trend is confirmed, 2024 would solidify its position as the year with the lowest job creation in the U.S. since 2019, excluding the atypical period of 2020.
While a slowdown in job creation could be interpreted as a sign of labor market weakening, it is important to note that a pace exceeding 150,000 new jobs per month still reflects a robust economy. Moreover, this data follows a series of positive indicators released throughout the week, contributing to the narrative of delayed expectations for a more aggressive normalization by the Federal Reserve in 2025.
Should the NFP exceed expectations, it will likely strengthen the narrative of a reduced need for additional cuts by the Fed. This scenario would probably bolster the U.S. dollar (USD), potentially pressuring equity markets, especially if there is a rise in Treasury yields.
The impact of a stronger dollar could be particularly significant for Latin American currencies. In a context where many of these currencies are already at multi-year lows against the USD, a further boost to the U.S. dollar could exacerbate exchange rate pressures in the region.
Overall, the December NFP report emerges as a major market catalyst. While a moderation in job creation is expected, the strength of the U.S. labor market remains a key factor. Market reaction will hinge on the magnitude of the figure and its potential impact on the Fed’s monetary policy and, consequently, on the value of the USD and emerging market currencies.”
Analysis by Quasar Elizundia, Expert Research Strategist – Pepperstone