Financial market research and analysis

The US dollar has lost some shine in New York as the US equities traded south on the combination of a pale picture out of China and the solid ADP read out of the US.

The US economy added 257’000 new private jobs in December against 198’000 expected by analysts. The services sector expanded in a faster pace according to the PMI read.
Demand in durable goods remained flat as factory orders contracted by 0.2%m/m in November as expected.

The attention now shifts to the FOMC minutes from December 15-16 meeting that marked the end of multi-year zero rate policy in the US.

The Fed is expected to follow up with 1% hike through 2016, perhaps at a pace of 25 basis points rise every other meeting. However, the domestic and global macro developments will likely be the major caveats. In this context and given the chaotic start to 2016, Janet Yellen could well be constrained to put her plans fully in place. The US dollar is set to strengthen on the hawkish Fed divergence vis-à-vis the rest of the world. Nevertheless, the DXY sees resistance at the 100 hurdle and the US yields are rather stagnant as the market is unsure about Fed’s capacity to keep up with a potentially premature normalisation.