US Inflation Cooling and Job Growth Rebound Fuel Market Rotation Trade

Recent US Consumer Price Index (CPI) data indicates a cooling trend in inflation, which has significantly reinforced the market's "rotation trade" strategy. Investors are increasingly shifting capital from dominant mega-cap technology stocks toward broader market sectors as inflation pressures ease. This shift is further supported by a notable rebound in the labor market, with the US adding 130,000 new jobs in January. This performance marks a sharp contrast to 2025, which saw a sluggish total of only 181,000 jobs added throughout the entire year. The combination of softer inflation and economic resilience increases the likelihood of a more accommodative monetary policy from the Federal Reserve. Consequently, the US Dollar (DXY) faces downward pressure while small-cap indices and major pairs like EUR/USD gain traction.