U.S. Treasury Department’s Revised Forecast and FOMC Statement
On Monday, the U.S. Treasury Department is expected to announce its revised forecast for first-quarter borrowing, along with a preliminary estimate for second-quarter needs. Meanwhile, market participants anticipate that the Federal Reserve will maintain the fed-funds rate at a range between 5.25% and 5.5%. However, investors will focus on the policy statement and closely analyze remarks from Fed Chair Jerome Powell for any indications of imminent rate cuts. Fed-funds futures traders have already factored in a slightly better than 50% chance of a quarter-point cut by the March 20 meeting. Furthermore, they have priced in a higher than 50% chance that the fed-funds rate will decrease to at least 3.75%-4% by December, based on the CME FedWatch tool’s data.
December Jobs Report and Impact on Labor Market
Market participants will eagerly await the release of the December jobs report on Friday, as it will provide valuable insights into the state of the labor market. Analysts will pay close attention to any signs of cooling in employment numbers. U.S. and global crude benchmarks (U.S. CL00, +0.08% and global BRN00, +0.02%) experienced a rally last week, reaching their highest levels since November. This surge was attributed to concerns over Middle East tensions and U.S. production outages caused by frigid temperatures. Although Asian trading hours saw oil futures spike higher in response to the drone attack and U.S. military fatalities, prices later pulled back.
The economy continues to demonstrate resilience, while inflation appears to be evolving favorably. Analysts at KBC Bank in Brussels highlighted this positive sentiment, stating in a client note, “We believe that anything other than this will extend the cautious market sentiment.”