FED: Beige Book Sees Softer Labor Market But Still A Measured Moderation
Wednesday’s Beige Book, the first since President Trump’s inauguration, showed a further moderation in anecdotal labor market conditions but it continues to come at a gradual pace rather than a sharper deterioration:
- “Employment nudged slightly higher on balance, with four Districts reporting a slight increase, seven reporting no change, and one reporting a slight decline. Multiple Districts cited job growth in health care and finance, while employment declines were reported in manufacturing and information technology. Labor availability improved for many sectors and Districts, though there were occasional reports of a tight labor market in targeted sectors or occupations. Contacts in multiple Districts said rising uncertainty over immigration and other matters was influencing current and future labor demand. Wages grew at a modest-to-moderate pace, which was slightly slower than the previous report, with several Districts noting that wage pressures were easing.”
The distribution of Districts reporting increases, no change or decreases in headcount:
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EUROPEAN FISCAL: France 2024 Budget Deficit Less Than Forecast
The French general government budget deficit ended 2024 at E156.3bn, smaller than the E163.2bn the Finance Ministry forecast in its draft finance bill back in November. It also compares favorably to the E173.3bn in 2023.
- We calculate this as being worth 5.4% GDP for 2024. Whilst there can be differences compared to what the Ministry of Finance formally forecasts, it's an improvement from the 6.1% forecast for 2024 in its November update but is still firmly above the initial target of 4.4% (around a budget deficit of E146.9bln).
- The data come after PM Bayrou forcefully pushed the 2025 budget through parliament without a vote on Monday, targeting a deficit of 5.4% GDP for 2025.
- The French Ministry of Budget and Public Accounts has published an updated timeline of key milestones for the 2025 budget:
- 3 February: Discussions began on the report of the joint committee (CMP) of the 2025 Finance Bill at the National Assembly.
- 6 February: Discussion on the 2025 Finance Bill in the Senate will take place.
- 17 February: New reading of the PLFSS 2025 (social security financing bill) expected in the Senate.
- In terms of the latest monthly data, the narrowing in the ytd deficit from E172.5bn as of November to E156.3bn looks in keeping with the typical seasonal pattern.
- We will follow up with an breakdown of the components driving the narrowing in the budget deficit in 2024.
SEK: EURSEK Pierces Jan 2 Low
EURSEK has pierced the Jan 2nd low at 11.4146, now 0.3% lower today. No obvious headline trigger for the move, with a clear breach of this level exposing the Oct 22nd low at 11.3809 and trendline support drawn from the December 2023 low at 11.3562.
- Yesterday’s moderation in trade tensions between the US and Canada/Mexico has supported risk sentiment this morning, likely aiding the SEK on the margin. Sweden’s economy is sensitive to tariff developments given exposure to trade with the US and the EU.
- The Riksbank January meeting minutes – released this morning - suggested the Executive Board is happy with the current level of rates for now, as they assess the impact of past easing and look for more certainty around the international trade outlook. However, we view the risks as clearly still tilted towards more easing. Activity data between now and the March meeting will be key to the rate outlook.
OPTIONS: Expiries for Feb04 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0250(E873mln), $1.0280(E910mln), $1.0300(E1.2bln), $1.0320(E1.0bln), $1.0375(E1.0bln), $1.0395-05(E1.4bln), $1.0425-35(E2.4bln)
- USD/JPY: Y152.00($500mln), Y154.00($663mln)
- AUD/USD: $0.6275(A$1.6bln), $0.6335-50(A$896mln), $0.6420(A$1.1bln), $0.6595-00(A$2.5bln)
