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Strong US jobs data boosts economic transition optimism


Stay ahead of the game with today’s market insights brought to you by the expert team at vtmarkets.com.

US stocks declined lower on Monday, extending their previous slide, and continued to give back some of this year’s gains amid a dismal market mood. Hawkish Fed bets underpin the US Treasury bond yields and US Dollar, which exerted bearish pressure on equity markets. Meanwhile, traders are waiting to see if Jerome Powell will dampen the bullish reaction to his recent remarks as the Federal Reserve keeps its firm grip on policy. Policymakers from the US appear optimistic about the economic transition after witnessing strong United States employment and activity data on Friday.

On top of that, the political tensions between US and China weighed on the market mood, further fueling demand for the safe-haven US Dollar. On the Eurozone front, European Central Bank (ECB) ’s Robert Holtzmann said that monetary policy must continue to show its teeth until we see a credible convergence to our inflation target.

The benchmarks, S&P 500 and Dow Jones Industrial Average both declined lower on Monday as the S&P 500 remained under pressure as China-linked fears join fresh hawkish concerns over Fed. The S&P 500 was down 0.6% daily and the Dow Jones Industrial Average also dropped slightly with a 0.1% loss for the day.

Nine out of eleven sectors in the S&P 500 stayed in negative territory as the Communication Services sector and the Information Technology sector are the worst performing among all groups, losing 1.31% and 1.22%, respectively. The Nasdaq 100 meanwhile retreated the most with a 0.9% loss on Monday and the MSCI World index was down 1.1% for the day.

Main Pairs Movement

The US dollar advanced higher on Monday, extending its last Friday rally, and climbed to fresh February highs against most major rivals near the 103.70 level amid a risk-averse environment. The upbeat economic report from the US fueled speculation that the US Federal Reserve (Fed) will keep tightening its monetary policy while chances of a rate cut by year-end decreased sharply. Further fueling the dismal mood were mounting tensions between the United States and China.

GBP/USD declined lower on Monday with a 0.31% loss after the cable preserved downside traction and refreshed its daily low below the 1.2020 mark amid a dismal market mood. On the UK front, the Bank of England Chief Economist Huw Pill said that UK policymakers are prepared to do more to get inflation back to target. Meanwhile, EUR/USD also stumbled to multi-week lows at around the 1.0720 area amid US Dollar strength. The pair was down almost 0.65% for the day.

Gold advanced slightly with a 0.13% gain for the day after rebounding from a one-month low at $1864 during the US trading session, but the recent hawkish bias over the Fed’s next move should keep the Gold sellers hopeful. Meanwhile, WTI Oil rebounded higher with a 1.42% gain for the day. WTI posted a modest intraday advance and settled at $74.30.

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Economic Data

CurrencyDataTime (GMT + 8)Forecast
AUDRBA Interest Rate Decision (Feb)11:303.35%
AUDRBA Rate Statement11:30