Oil price

On Monday, although crude oil futures experienced early declines in the U.S. session, they finally reversed course and ended the day with substantial gains. This reversal is consistent with our weekly outlook for oil prices, which is expected to offset some of the generally bearish bias in the oil market by improving the domestic economic outlook.

Monday's trading was marked by another round of upbeat U.S. macroeconomic data, suggesting that economic activity could accelerate in early 2024. The purchasing managers' index, published by the Institute for Supply Management, surged by 2.9% to 53.4% in January. This increase was mainly driven by rapid growth in new orders, expansion of employment and imports. Notably, all of the top 10 U.S. service industries grew during this period.

Foreign exchange market

The dollar surged to its highest level in about three months after Fed Chairman Jerome Powell's latest speech. Following Powell's comments on 60 Minutes, traders reassessed their expectations for the number and pace of U.S. interest rate cuts for the rest of the year.

Chairman Powell's comments over the weekend and the apparent strength of Friday's nonfarm payrolls report have increased the likelihood that the Fed will delay a rate cut until May or even June. A lot can happen between now and then, and FX trader positioning is likely to be influenced by data and central bank speeches ahead of the February 13 inflation report, which could be the day when further clarity on the 2024 inflation outlook will be provided.