Investing.com -- The U.S. Federal Reserve is expected to continue reducing key interest rates due to the weak labor market, as per Louis Navellier's commentary. On Wednesday, ADP reported that only 122,000 private payroll jobs were created in December, a number lower than the economists' consensus estimate of 139,000. This is the smallest increase in ADP private payrolls since August.
Fed Governor Christopher Waller expressed his belief that inflation will moderate towards the Fed's 2% target and voiced his support for further interest-rate cuts this year. Waller stated at an Organization for Economic Cooperation and Development event in Paris that any future easing would depend on data related to progress toward 2% inflation while preventing a weakening labor market.
Meanwhile, the economic situation in Europe is deteriorating. Germany's factory orders in November saw a 5.4% drop, according to Destatis. The economic sentiment index for the eurozone declined to 93.7 in December from 95.6 in November. Additionally, consumer sentiment in France fell to 89 in December from 90 in November due to increasing fears of layoffs. Navellier stated that the eurozone is now in a serious recession.
The weak currencies in Europe have driven consumer inflation to a 2.4% annual pace in December in the eurozone, surpassing the European Central Bank's (ECB) 2% target rate for inflation. Despite the recession, the ECB is expected to continue reducing key interest rates an additional four to five times in 2025.
On the global front, British Prime Minister Keir Starmer and his Energy Secretary, Ed Miliband, have stopped issuing new licenses for major energy companies to increase exploration in the North Sea. This decision is expected to impact Scotland and fuel calls for independence from policies originating from 10 Downing Street.
The new British ambassador to the U.S., Lord Peter Mandelson, known for his hostility towards Donald Trump, has garnered the nickname "Prince of Darkness" by the British media. The biggest disagreement may be over Ukraine, which recently decided not to renew the transit fees it received from Russia for transporting natural gas through Ukraine to Austria, the Czech Republic, Hungary, and Slovakia. As a result, Ukraine may require more international aid after losing nearly a billion dollars in annual transit fees.
The U.S. dollar is strengthening as most other countries are struggling or in a recession. The euro is expected to fall below the U.S. dollar in the coming months. Furthermore, the British pound may drop to 1.15 relative to the U.S. dollar this year. A strong U.S. dollar can hinder sales in the multi-international stocks in the S&P 500, where approximately half of their revenue is generated outside the U.S. Consequently, domestic stocks, especially small-to-mid capitalization companies, tend to flourish in a strong U.S. dollar environment.
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