BoJ To Hike After Economic Growth! The NASDAQ Takes a Nosedive!

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  • The US added 275,000 jobs in February 2024 beating expectations by 80,000.
  • US Average Salary Growth slowed to the lowest growth since March 2022. The US Unemployment Rate rises back to 3.9% after 3 months of no movement.
  • Japanese economists advise the Bank of Japan may opt to hike in their meeting towards the end of the month.
  • US Stock Market unable to maintain bullish momentum and hold onto gains. Stocks traders watch this week’s CPI announcement with caution.

USDJPY – No Recession For Japan, When Will the BoJ Hike?

The new employment data for the US originally brought about a decline in the US Dollar, before correcting upwards. The first reaction to sell the Dollar was largely due to data indicating a rate cut by June. The salary growth fell to a level which the regulator is more comfortable with, and the unemployment rate rose to 3.9%. Previously economists were advising the Unemployment Rate will need to reach 4-4.5% to bring inflation down. According to the FedWatch Tool, 58% of traders believe the Fed will cut in June and 25% believe it could be in May.

The Japanese Yen on the other hand is not seeing major volatility within this morning’s Asian session. The Yen is trading slightly higher than the day’s market price, but investors will monitor any change in momentum. Previously, the preliminary economic growth data indicated that the Japanese economy has slipped into a recession. However, the GDP rate read 0.1% which confirms “no recession”. Therefore, economists are continuing to predict the Bank of Japan will keep interest rate hikes as an option for the next two meetings.

The market is implying a 53% chance the Bank of Japan will shift rates to zero at its meeting on March 19th.  However, some analysts still believe it might be at April’s meeting. However, the currency is likely to grow for as long as the Japanese economy does not fall into a “technical recession” and other competitors continue with rate cuts.

For this reason, investors are wondering why the USDJPY is not witnessing a large clear downward price movement? According to fundamental analysts, many investors are awaiting confirmation from the monthly inflation figures to determine when the Federal Reserve is likely to “pivot”. If the yearly inflation rate does not decline, the Fed may opt to push back rate hikes. In this case, the Dollar may remain stubborn. However, any fall in inflation can result in the Japanese Yen rising.

USA100 – Analysts Expect Inflation to Remain At 3.1%! What Does This Mean For the NASDAQ?

After rising to a new all time high, the NASDAQ took a nosedive falling 2.29%. From the top 10 most influential stocks, only Apple and Alphabet stocks managed to maintain their value. Broadcom (-6.99%), Costco (-7.64%) and NVIDIA (-5.99%) saw the largest decline. Even though the price was obtaining buy signals as the price was rising, there were also clear signs the price may collapse. For example, the price was “overbought” on many oscillators, and the RSI also formed a “divergence” signal.

The price of the USA100 will now primarily be dependent on tomorrow’s inflation data. The employment data was ideal for the USA100 as it indicates a resilient employment sector but possibly less upward pressure on inflation. Analysts expect monthly inflation to read 0.4% which will keep the inflation rate unchanged at 3.1%. According to analysts, the Core Consumer Price Index will rise 0.3%.

If inflation reads lower than expectations, even if slightly lower, the stock market could potentially rise, as interest rates become less attractive. However, if inflation rises, the stock market is likely to struggle as a “soft landing” becomes a lower possibility.

Michalis Efthymiou

Market Analyst

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