This is another data-overload week, with the US market back in the headlights

Outlook

This is another data-overload week, with the US market back in the headlights (JOLTS, ADP, and nonfarm payrolls. We also get ISM PMIs, Australia GDP and late in the week, the U Michigan consumer confidence and eurozone retail sales. Japan household spending might be interesting as contributing to the signal about Mr. Ueda’s rate hike.

As usual, nonfarm payrolls will get outsized attention but it will be misplaced. See the Reuters chart. After the hurricane-wrecked data the month before, payrolls will return to something resembling normalcy. Right-wingers and gloomsters are determined to find recession lurking in the labor market data but keep getting rebuffed.

Somewhat weirdly, just about everybody is expected to cut rates, so to blame the Fed’s Dec cut for the dollar’s sloppy decline doesn’t make sense. And it’s not only relative interest rates and yields that matter—growth matters, too. The eurozone will be lucky to get 1.5% while in the US, the Atlanta Fed sees 2.7%, up from 2.6% the week before. Personal consumption beat out less promising numbers from other categories and rose to 3% from 2.8%. We get another release later today. 

Central Bank meetings

RBA December 9-10.

BoC December 11.

ECB December 12.

Fed December 18.

BoE December 19.

Bank of Japan Dec 19.

Forecast

We have mixed signals. Yields are up but so is the stock market. The dollar is mixed, up against most today but most notably against the euro, which is more about selling euros than buying dollars. Inflation readings are mixed, too, with even Europe seeing stickiness.

There seems to be a fair amount of magical thinking and wishful thinking going on, chiefly on the theme that Trump can’t really do all that much damage. Ah, but he can. And we will not be prepared for its various manifestations. In the meanwhile, we continue to expect yields to steady and go back up on the inflation implications of incoming policies, taking the dollar with them. But that may not materialize right away.

There’s a lot of noise to come. With any luck, it will abate by the time the labor market data starts coming in. We are pretty sure it will show the labor shortage is still in play, unemployment is not on the rise, and wages are higher but not frighteningly so. Labor will not actually be important until the tariff story develops further.  

Political Tidbit: The press is howling about PresBiden pardoning his on after saying he wouldn’t. The Dems make the valid point that the Republican hypocrisy is laughable--their guy should be in jail, not headed for the White House. On a serious note, the Trump camp fully intends to keep its promise to “go after” political rivals and the Bidens are preparing for the new Justice Dept to come after them with false changes by the bucket-load.

The Economist Tidbit: The annual issue about what to expect in 2025 has an editor’s summary in the front of the book. Four of the ten entries are about Trump directly and another 3/10 contain a Trumpian effect, like climate denying slowing down green efforts.

The cover story is about Musk the disrupter in chief. One point stands out—a narcissist almost never partners with another narcissist and if they do, one of them goes down in flames.

Another segment is about how well a panel of expert forecasters performed in 2024—they got 4.5 right on 8 issues. Forecasting is hard, especially about the future. For next year one of the forecasts is for US tariffs on China. A combined 63% see 2.5-15% tariffs or 11-12.5%. What happened to 60%?

Trump Tidbit: The FT’s Martin Sandu sometimes has some intriguing essays. For those in despair over the election of Trump, he points out that what seems like chaos may well be form of game-playing. “Unpredictability is a feature, not a bug.” We get keep caught “off guard with one gobsmackingly unconventional cabinet nomination after another.”

But those absurd choices are a game strategy for Trump to find out who is really with him—the loyalty test. As for inconsistent statements on policy issues like Ukraine, “the uncertainty is the intention.”

“There is a plausible view that Trump’s behaviour is no more than what it looks like on the surface — sheer policymaking incompetence by an impetuous, mediocre* business executive. But this misses out the ways in which unpredictability serves Trump’s interests, and that Trump knows this.

“At a basic level, autocrats (actual and wannabes) and gangster bosses thrive on fear and reject the rule of law (in the broadest possible sense of a system of rules that applies consistently to everyone).

“There is a branch of economics that makes perfect sense of this. Game theory studies strategic behaviour: situations where the best thing you can do depends on other people’s actions which, in turn, they choose depending on what they think you may do. A basic concept in game theory is that of a “mixed strategy”: choosing randomly between possible actions (not all actions need to be chosen with the same probability).

“A mixed, ie randomised, strategy can be better for you than any non-random one (ie predictable behaviour) because it prevents your opponent from moving the “game” in a direction that is better for them and worse for you. It can even be the only approach that stabilises a situation where the interests of different “players” are badly aligned.

An example: there is an argument “that he may just be the man to pull off a repeat of the 1980s Plaza Accord on realigning global currencies.” Eeek.

You can try to play the same game, but for Europe, the better response is to do what’s right for yourself while identifying what you can do without the US. 

---

This is an excerpt from “The Rockefeller Morning Briefing,” which is far larger (about 10 pages). The Briefing has been published every day for over 25 years and represents experienced analysis and insight. The report offers deep background and is not intended to guide FX trading. Rockefeller produces other reports (in spot and futures) for trading purposes.

To get a two-week trial of the full reports plus traders advice for only $3.95. Click here!