Fed rate cut in March unlikely, says Powell

The Federal Reserve

The USD is up to an eight-week high, as the market has been reassessing when Fed is likely to cut rates. It all started with Jerome Powell's press conference on Wednesday evening, when he said that it would not be appropriate to cut rates until there was greater confidence that inflation is moving to 2%. After the Fed press conference, the target rate probability of a rate cut in March has fallen to 35.5%.

The probability fell further after Friday's job report, which revealed that the US economy created 333,000 jobs in January. Expectations were for 180,000 job creations. A Jerome Powell interview with the CBS news show "60 Minutes" aired on Sunday night shut the door on a March rate cut even more, where the said it was unlikely the fed will have the confidence to cut at next Fed meeting. The Chicago Mercantile Exchange (CME) toolwatch is now pricing a 17.5% chance of a March rate cut. The odds for a cut in May have lengthened to 58.5%.

The Caixin/S&P Global services PMI

In Australia, trade surplus narrowed in December to A$10.95Bln, broadly in line with expectations. Imports rebounded 4.8% month-over-month (MoM), after a a sharp slide the previous month of 8.4%. Exports rose 1.8%. China's services activity expanded at a slightly slower pace in January. The Caixin/S&P Global services purchasing managers' index (PMI) edged down to 52.7 from 52.9 in December, remaining in expansion territory for the 13th consecutive month.

German trade balance & US PMI

In Germany, trade balance widened to €22.2Bln in December, as imports fell more than exports. Over in the US, the market awaits ISM services PMI for January, expected to rise to 52. In December, the index had fallen to a seventh month low.

Vodafone

Elsewhere on the equity market, Vodafone Group reiterated it full year adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of about €13.3Bln, after posting a Q3 revenue marginally below analysts’ expectations.

McDonald's

McDonald's is due to report at before market opens on Monday. The street expects the fast-food giant to post earnings of $2.83 per share, up about 9% YoY. Revenue is forecast to rise at the same pace to $6.44Bln. So far, McDonald's has managed to keep inflationary pressure under control, maintaining stable margins through menu price increases and technology initiatives. Investors will also be looking for an update on McDonald's business in China, its third largest market globally.

Restoring China operations is crucial point in the company's strategy: in 2023, McDonald's planned to expand its global franchise:400 openings in the US and 1,500 globally, including 900 in China.

Caterpillar

Caterpillaris expected to report an improvement in both earnings and sales in the fourth quarter. The street anticipates earnings of $4.75 per share, on revenue of $17.09Bln. A year ago, earnings per shrare (EPS) came in at $3.86, and revenue reached $16.6Bln. Inflationary pressures have been putting Caterpillar's top and bottom line to the test. Customers have been putting reins on spending, but thanks to a solid backlog of over $28Bln at the end of the third quarter, revenue growth should have. been preserved in Q4. Caterpillar also had to deal will higher material costs and rising freight services, which have weighed on margins in previous quarters.