U.S. Weekly Jobless Claims for the week ending 13Jan24 were 187k, below the 205k estimate, and the lowest claims since 23Sep22 (16 months). Today’s strong jobs data, combined with yesterday’s higher-than-expected December Retail Sales, and last week’s higher-than-forecast CPI (consumer inflation), taken together depict an expanding U.S. economy undeterred by high borrowing costs.
The recent string of positive economic data has caused traders to push back their timelines for expected Fed rate cuts, lifting the U.S. dollar and treasury yields in the process.
The dollar index is higher for the 3rd consecutive day, +0.10% at 103.55, and confirming the breakout from its weekly downtrend. Today’s dollar gains vs. the G10: +0.47% vs. CHF, +0.29% vs. NOK, +0.24% vs. NZD, +0.21% vs. EUR, & +0.11% vs. GBP.
U.S. Treasury yields are higher in the long-dated tenors today, and the 10-year yield is +14 basis-points since last week’s CPI data. Fed Funds Futures are now pricing in only a 56% probability of a rate cut at the FOMC’s March meeting, down from a 78% probability as recently as Jan 12th. Probabilities of cuts at the May, June, July, and September meetings have seen similar declines.
Equities are lower in lock step with the higher trend in yields, the continuation of high borrowing rates prolonging the headwind for businesses and driving down revenues.
Tomorrow’s economic calendar includes Consumer Sentiment and Existing Home Sales.
