Investors see through US jobs data and Fed prospects, eyeing AI and Dollar decline
The story
Great jobs report â The US economy added 130K jobs in January, nearly double the early estimates, while the Unemployment Rate surprisingly dropped to 4.3%. Bond markets responded by pushing the pricing of the next Federal Reserve (Fed) interest rate cut out to July. Nevertheless, the US Dollar gained limited ground while Stocks edged higher. Some explained these moves by citing tomorrow's all-important US inflation report, or president Donald Trump's demand that the Fed cut interest rates anyway.
Why it matters
Bigger forces at play â First, the AI play continues sweeping markets off their feet. For some, like frontier model makers and memory chip providers, it's a win-win situation. For others, like legacy software firms, it's a lose-lose one. Outside equity markets, pressure on the US Dollar also seems persistent and somewhat disconnected from interest rate prospects. Trumpâs tariff policy and his curbing of Fed independence appear to have a long-term impact. These larger trends may have increasing influence.
Whatâs next
Next disruptions â Yesterday, it was the real estate sector's turn to suffer from fresh AI technology that could steal its lunch. Which sector will it be today? The losers may continue piling up. On the currency front, tariffs are of interest. Wednesdayâs House of Representativesâ vote against the presidentâs duties on Canada is symbolic, but it could influence Justices at the Supreme Court deliberating the legality of most of his tariffs. Certainty around levies could allow the Greenback to grind its way up â but that is far from guaranteed.
