Global markets are experiencing significant fluctuations as economic data from various regions prompt shifts in investor sentiment. On Wednesday, the Japanese Yen found support from expectations that the Bank of Japan (BoJ) will increase interest rates further, buoyed by a surge in Japanese real wages recorded in December. Meanwhile, tensions between the United States and China escalated as China’s Commerce Ministry announced new tariffs on several US imports, including coal, liquefied natural gas (LNG), crude oil, farm equipment, and certain automobiles.
In the United States, traders are on edge ahead of Friday’s Nonfarm Payrolls (NFP) report, which is anticipated to influence the Federal Reserve's monetary policy direction. The anticipation has weighed on the US Dollar Index (DXY), which has been under pressure for three consecutive days, trading around 108.00. Despite this, market participants have maintained their bets that the Federal Reserve will proceed with interest rate cuts, contributing to a record-setting rally.
In New Zealand, the unemployment rate climbed to 5.1% in the fourth quarter of 2024, up from 4.8% in the previous period, marking its highest level since September 2020. The employment rate also saw a decline to 67.4% from 67.7%, while the underutilization rate increased slightly to 12.1% from 11.6%. These figures aligned with market expectations but highlighted challenges in New Zealand’s labor market.
The announcement of new tariffs by China's Commerce Ministry has heightened fears over US-China trade relations. The ministry declared a 15% tariff on US coal and LNG imports and an additional 10% tariff on crude oil, farm equipment, and certain automobiles. The move exacerbated existing trade tensions and contributed to a risk-off sentiment that could impact the New Zealand Dollar (NZD).
In Japan, the Yen's strength is attributed to expectations of further BoJ rate hikes. The currency has gained traction as investors respond to December's growth in real wages, which bolsters the case for monetary tightening. As a result, the USD/JPY has been declining and is poised to test 153.00 during Asian trading hours.
China's economic data also added complexity to the global market landscape. The Caixin Services Purchasing Managers Index (PMI), a critical indicator of business activity in China's services sector, fell to 51.0 in January from 52.2 in December, missing the estimated 52.3 figure. This unexpected decline has underscored concerns about China's economic momentum.
Amid these developments, former US President Donald Trump stated on Monday that he would likely engage in talks with China. His remarks come at a time when global markets are closely monitoring US-China interactions for any indications of easing or intensifying trade tensions.
The ongoing economic uncertainties have created a challenging environment for investors and traders worldwide. With the upcoming US jobs data in focus, market participants are bracing for potential impacts on monetary policy and currency movements.