In our previous issue we predicted the market would take its cue from the central banks’ rhetoric regarding future interest rate cuts, and suggested there may be some volatility around the US payroll figures.

Sure enough, both the Bank of England and the Federal Reserve batted away any suggestion rates might come down early with Fed chair Jerome Powell going so far as to say they would stay ‘higher for longer if needed’ given the strength of US consumption.

Also true to form, the non-farm payroll figures caught the market off-guard with the addition of 353,000 new jobs in January against consensus expectations of a 180,000 increase.

As one investor put it, if Jerome Powell had killed all hope of a March rate cut then the jobs number well and truly buried it.

As well as slashing their March bets, traders reduced the odds of a May cut with the attention now turning to the US January inflation data due on 13 February and in particular the ‘core’ figure which strips out more volatile food and energy prices.

Likewise, odds of an early cut in UK rates have lengthened and all eyes will be on the consumer and industrial inflation numbers on 14 February.

Finally, the UK fourth-quarter GDP (gross domestic product) number on 15 February will show whether or not the economy grew in the last three months of 2023 – the current consensus is it shrank slightly – while US January retail sales figures released the same day will be closely watched by the Fed as well as economists to see whether US consumers are still feeling upbeat. 

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