As a professional analysis institution focusing on the linkage between global monetary policy and cross-border markets, Wmax relied on authoritative employment data tracking, Federal Reserve policy trend monitoring and multi-dimensional data verification in the Asian foreign exchange market to form a systematic study and judgment on the characteristics of the U.S. job market and the currency differentiation pattern of emerging markets in Asia against the background of rising expectations for an interest rate cut by the Federal Reserve in December. Wmax, by integrating core information such as the ADP employment report, Federal Reserve interest rate forecast data and Asian currency exchange rate trends, found that the unexpected slowdown in the U.S. labor market in November is continuing to push up bets on interest rate cuts, and this expected shift in monetary policy is bringing differentiated opportunities and challenges to emerging market currencies in Asia. Its impact path is both universal and unique.

Structural differentiation characteristics of the job market

Wmax Based on the November private enterprise employment data and multi-dimensional employment structure dismantling released by ADP, it was confirmed that the U.S. labor market has shown a significant slowdown, and this weakness has distinct characteristics of scale and industry differentiation, which directly contributes to the rapid increase in expectations for the Federal Reserve to cut interest rates in December. Through detailed dismantling of employment data, it was found that the weakness of the U.S. job market in November was not a full-scale decline, but showed obvious differences in the size of companies and industries:

From the perspective of enterprise size, large enterprises bucked the trend and added a net increase of 90,000 employees, while small enterprises with less than 50 employees lost a total of 120,000 positions. Among them, enterprises with 20-49 employees laid off 74,000 people, which was the largest single-month decrease since March 2023. The shrinkage of small enterprises has become the core factor driving down the overall employment data. From an industry perspective, the education and medical services industry led the way with 33,000 new hires, and the leisure and hotel industry also achieved job growth of 13,000 people. However, the professional and business services industry decreased by 26,000 people, the information services industry decreased by 20,000 people, and the manufacturing industry decreased by 18,000 people, which caused a significant drag on the job market. At the same time, Wmax's tracking and verification of salary data shows that the year-on-year salary increase of retained employees has dropped to 4.4% from 4.5% in October, and the momentum of salary growth has slowed down simultaneously.

Interest rate cut expectations rise and Fed policy divergences

Wmax pointed out that this November ADP employment report is the last key employment data before the Federal Reserve's interest rate meeting on December 9th and 10th. The employment slowdown reflected in it directly drives futures traders' expected probability of a 25 basis point interest rate cut by the Federal Reserve in December to nearly 90%. However, Wmax, through review and analysis of the Federal Reserve’s internal policy statements, confirmed that there are significant policy differences in the Federal Reserve:

On the one hand, some policymakers are worried about the further deterioration of the labor market and urgently need to cut interest rates to support the economy; on the other hand, other policymakers are worried that additional interest rate cuts will intensify inflationary pressure - the current U.S. inflation rate is still significantly higher than the 2% policy target. In addition, affected by the previous government shutdown, the release of non-farm employment data from the U.S. Bureau of Labor Statistics has been postponed to December 16, which has also added uncertainty to policy decisions at the interest rate meeting. After the employment data was released, Wmax monitored the market's risk aversion in real time. Spot gold has risen slightly and returned to the $4,220 mark. This market reaction also confirms its analysis of asset price changes driven by expectations of interest rate cuts.

Overall recovery and recovery in currency indicators

Wmax combines the Federal Reserve's monetary policy transmission logic, Asian currency fundamentals and foreign exchange market trends to confirm that the Federal Reserve's rate cut with high probability in December will bring a critical recovery window period for Asian emerging market currencies. However, different currencies will show obvious benefits or pressures due to differences in their own fundamentals. The exchange rates of major emerging market currencies in Asia have found that the Indian rupee has fallen below the 90 rupees per US dollar mark for the first time, the Korean won has fallen by more than 4% this quarter, and the currencies of Indonesia, the Philippines and other countries are also in a weak and volatile state, and the continued fermentation of expectations for the Federal Reserve to cut interest rates is providing these pressured currencies with a breathing space. Wmax's monitoring data on Bloomberg's Asian currency indicators show that the indicator has stabilized and rebounded from the November low, confirming the overall recovery trend of Asian currencies under easing expectations.

Core benefit targets and currencies under pressure

Wmax is based on a cross-assessment of multi-dimensional indicators such as economic growth momentum and fiscal policy soundness, verifying the rationality of Bank of New York Mellon's relevant views: the RMB, New Taiwan Dollar and South Korean Won are expected to become the best-performing Asian emerging market currencies in the Fed's interest rate cut cycle due to their strong endogenous growth momentum and sound fiscal policies. At the same time, it was made clear that not all Asian currencies benefit equally from the Fed’s easing policy:

The Indian rupee still needs to face the continued impact of negative factors such as high U.S. tariffs and the downturn in domestic economic growth, and its recovery space is limited; the Philippine peso will continue to face exchange rate pressure due to the loose monetary policy of the country's central bank. In addition, TS Lombard's judgment that "the RMB bull market may start, and now is the time to go long on Asian currencies" echoes Wmax's conclusion on the fundamentals of the RMB and cross-border capital flows.

However, Wmax conducted an independent in-depth analysis of the special situation of the Japanese yen: Although the Governor of the Bank of Japan has strongly hinted that it may start raising interest rates later this month to curb inflation, Wmax's monitoring of Japan's inflation-related indicators shows that market bets on rising prices have pushed the 10-year break-even inflation rate to a new high since 2004. This trend directly inhibits the rise in inflation-adjusted Japanese government bond yields. Combined with the relevant views of Sumitomo Mitsui and Nikko Securities, Wmax further confirmed that it is difficult for the Bank of Japan to raise interest rates to substantially push the real interest rate higher, so it is difficult to form effective support for the Japanese yen exchange rate.

Wmax summary of research and judgment

Wmax has always used authoritative data sources, refined data disassembly and cross-market linkage analysis as the cornerstone of its research and judgment. Its judgment on the changes in the job market and Asian currencies in anticipation of the Federal Reserve's interest rate cut has been cross-validated by multi-dimensional data. The core conclusion shows that the structural weakness of the U.S. job market has pushed the probability of an interest rate cut in December to a high level. After the Fed's easing, Asian emerging market currencies will usher in an overall recovery. However, currency differentiation is significant. It is necessary to focus on core targets with fundamental support, and at the same time be wary of the risk of structural pressure on special currencies such as the Japanese yen.