The US Dollar Index rose significantly on Friday after data showed that the world’s largest economy created more jobs than expected last month, boosting expectations that the Federal Reserve will pause its rate-cutting cycle at its meeting this month.
The Labor Department report revealed that the US economy added 256,000 jobs in December, surpassing economists’ expectations of a 160,000-job increase. Meanwhile, November’s figures were revised to 212,000 jobs.
The unemployment rate also dropped to 4.1% compared to expectations of 4.2%, while hourly wages rose by 0.3% last month after a 0.4% increase in November. Over the 12 months through December, wages grew by 3.9%, compared to 4.0% in November.
With inflation once again emerging as a key risk, the Consumer Price Index (CPI) data will be released on Wednesday. Economists expect the December CPI to show an annual increase of 2.9%.
While the Federal Reserve was confident in September that inflation had slowed enough to begin cutting interest rates, the annual inflation rate remains above the Fed’s 2% target. The Federal Reserve now expects inflation to rise to 2.5% by 2025.
The minutes from the Fed’s latest meeting, published on Wednesday, indicated that policymakers are concerned that Trump’s trade and immigration policies could prolong efforts to bring inflation back to the target level. Given this data, all indications point to the Federal Reserve maintaining a more hawkish stance compared to its peers in the G10 group.
From a technical perspective, as long as prices remain above the critical support level in the 107.50 range, the upward trend is likely to continue, aiming for new highs.
The British Pound (GBP) fell to its lowest level against the US Dollar (USD) since November 2023 on Friday, dropping by 0.5% to reach 1.2204 USD. This decline is attributed to concerns over the UK government’s fiscal policies and the selling of UK government bonds. Additionally, increasing uncertainty surrounding the UK economy, including high inflation and potential limits on interest rate hikes by the Bank of England, has weighed on the currency.
Fundamental Outlook for GBP/USD:
Key economic data is expected this week, drawing significant attention. On Wednesday, the Consumer Price Index (CPI) is forecast to remain unchanged year-on-year at 2.6%, according to LDN projections. On Thursday, monthly GDP data is expected to show growth, with LDN predicting an increase in GDP figures.
If the CPI remains stable and GDP data indicates growth, this could be a positive signal for the British Pound. Stable inflation, combined with improved economic activity as reflected in GDP growth, could lead to a recovery in the GBP/USD pair. Investors may interpret such data as an indication that the UK economy is on a more stable footing, despite current concerns over fiscal policies. Therefore, the combination of stable CPI and GDP growth is likely to strengthen the GBP against the USD in the short term.
Technical Outlook for GBP/USD:
From a technical perspective, the GBP/USD pair has shown signs of positive momentum after a downward trend, with key support in the price range of 1.2040–1.21. If this level holds, we anticipate a potential recovery for the Pound against the Dollar in the coming weeks, depending on the upcoming economic data.
Oil prices rose by 3% last Friday, reaching their highest level in three months as traders braced for potential supply disruptions due to a new wave of US sanctions targeting Russian oil and gas revenues.
The Biden administration imposed new sanctions aimed at Russian oil producers, tankers, intermediaries, traders, and ports, seeking to disrupt every stage of Russian oil production and distribution.
The US Treasury Department sanctioned companies such as “Gazprom Neft” and “Surgutneftegas,” which explore, produce, and sell oil, in addition to 183 vessels that have transported Russian oil, many of which are believed to belong to the so-called “shadow fleet” — older tankers operated by non-Western entities.
Two sources in Russian oil trading and Indian oil refining told Reuters that the sanctions would significantly disrupt Russian oil exports to its key customers, India and China. Additionally, severe cold weather in the United States and Europe supported oil prices, increasing demand for heating oil.
The Russian Foreign Ministry condemned the new US sanctions on Saturday, stating that Russia would continue to pursue its major projects in the oil and gas sector. The ministry described these measures as the most extensive US sanctions package to date targeting Russian oil and gas revenues.
It is expected that the price of a barrel of West Texas Intermediate (WTI) crude will average around $75 per barrel in 2025. In the short term, prices are projected to drop to around $65 in the first quarter before rebounding in early Q2.
Technical Outlook:
From a technical perspective, oil prices are encountering a significant resistance zone between $77.5 and $78. As long as prices remain below this level, a retest of the support area around $70 is possible.
The Nasdaq 100 index is showing some promising signs of recovery following the wave of selling triggered by the latest US jobs data. The non-farm payrolls for December came in much stronger than expected, significantly impacting bond yields, which in turn weighed heavily on growth stocks, particularly in the tech sector that is often sensitive to rising interest rates.
Despite these challenges, there remains a cautious sense of optimism in the market. The strong jobs numbers are seen as a positive indicator of the strength of the US economy. However, attention is now focused on the upcoming inflation data and the Federal Reserve’s next moves, which will play a significant role in shaping the economic outlook in the months ahead.
Technical Outlook for Nasdaq 100:
At LDN, we observe that the Nasdaq index continues to adapt to market developments, creating promising opportunities for future recovery as market conditions improve. While there are no strong signs of upward momentum at present, we anticipate the index may move towards the 20,500 level as a key milestone for recovery and future growth.
In light of these projections, it is recommended to adopt a smart hedging strategy to preserve assets and maximize potential gains from future market trends. This approach allows investors to make the most of potential shifts in market directions.
