The USD/ZAR pair edged up on Friday, while holding near recent three-week high of 18.8384, ahead of key US employment data later in the day that could provide clues over Fed rate outlook.
The exotic currency pair looked set to register its best weekly performance since early August, being up 2.45%, on the back of pared expectations of sizable and early interest rate cuts by the Federal Reserve this year.
Markets are now pricing in less than 140 basis points of rate cuts in 2024, compared with 160 basis points priced at the end of 2023.
According to CME’s FedWatch tool, the chance of a rate cut in March now stands at 65%, compared with 86% a week ago.
Market focus now sets on the US Non-Farm Payrolls report due out at 13:30 GMT today. Employers in all sectors of the US economy, excluding farming, probably added 170,000 job positions in December, according to market consensus, following a job growth of 199,000 in November. If so, this would be the third straight month with job growth below the average monthly gain of 240,000 over the past year.
According to Moh Siong Sim, currency strategist at Bank of Singapore, this week’s macro data indicated the US labor market seemed to be holding up and probably “the Fed will still need to stress the message of keeping the rates a bit longer than what the market has already priced in.”
As of 8:31 GMT on Friday USD/ZAR was edging up 0.39% to trade at 18.7708. Earlier this week, the exotic Forex pair went up as high as 18.8384. The latter has been the pair’s strongest level since December 13th (19.1002).
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