The initial spike to the 1.0660/70 post-Payrolls has quickly fizzled out, leaving EUR/USD trading in the 1.0650 area as markets continue to digest the US docket. EUR/USD upside capped at 1.0690/1.0700 Spot keeps meandering the daily range following mixed results from the US labour market during November, with market participants still adjusting to the unexpected contraction of Average Hourly Earnings, a proxy of wage inflation. Other than that, the pair is managing well to keep the trade within the daily range, with the upside so far capped by the 1.0690/1.0700 band, where are located today’s top and the 23.6% Fibo of the November drop, all amidst a generalized softer tone around the buck.
Gold was seen struggling for a direction and remained confined within a narrow trading range, with mild positive bias. Currently hovering around $1173 region, all set to post fourth consecutive week of declines, the precious metal seesawed between tepid gains and minor losses on the back of mixed US monthly jobs report .
The US Dollar Index – which gauges the greenback vs. its main rivals – has now returned to the 101.00 neighbourhood, coming down from a failed attempt to advance further north of 101.20.
On the last trading day of the week, major US equity indices opened flat, with both the S&P 500 and Nasdaq Composite index on track for weekly declines. During opening hour of trading, the Dow Jones Industrial Average was down nearly 30-point to 19,160, while the broader S&P 500 index was absolutely flat near yesterday’s closing level around 2,192. Meanwhile, tech-heavy Nasdaq Composite outperformed the broader indices and gained over 15-point to 5,267.
The Russian currency is now intensifying its upside momentum vs. the buck, sending USD/RUB to the area of daily lows in sub-64.00 levels. USD/RUB weaker on US data, oil The bearish fashion around the greenback continues to weigh on the pair today, which is so far printing its third consecutive session with losses and deflating from weekly tops in the mid-65.00s.
Currently, GBP/USD is trading at 1.2499, up 0.05% on the day, having posted a daily high at 1.2517 and low at 1.2420. Sterling has been robust in the wake of renewed pressures from the greenback across the board after a series of good enough data this week that leaves a Fed hike fully on the table for December.
Fed Cleveland’s President Loretta Mester was on the wires, via Reuters, noting that raising interest rates would be a prudent step Key headlines (via Reuters): Prospects are likely higher for changes in fiscal, immigration, infrastructure and trade policies Says ‘very uncertain’ how those changes will affect inflation, employment; ‘devil will be in the details’ Postponing hikes for too long would raise risks of recession and financial instability; fed not yet behind curve
Fed’s Governor Jerome Powell crossed the wires last minutes, via Reuters, stating that an increase in inflation compensation is a “good thing”. Key headlines (via Reuters): Should a patient to see how fiscal policy unfolds Focus on time and rate change may add to confusion Communication should emphasize uncertainty of forecast Dot plot changes over time reveal views on policy path Dot plot isn’t useful predictor of near-term rate moves
The Canadian economy expanded at a 3.5% rate during the third quarter. According to analysts from Wells Fargo, the fastest quarterly growth in Canada in two years may not be sustainable. They see downward pressure on the Canadian dollar (against the USD) amid monetary policy divergence between the Bank of Canada (BoC) and the Federal Reserve
The Organization of the Petroleum Exporting Countries (OPEC) agreed to cut output today, from the beginning of 2017.
Research Team at Goldman Sachs, notes that oil fundamentals have weakened sharply since OPEC announced a tentative agreement to cut production and GS now expects a large surplus of 0.7 mb/d in 1Q17 in the absence of such a cut.
Having posted a session high just below $1200 mark, Gold retreated and trimmed majority of tepid recovery gains amid renewed greenback buying interest. Currently trading around $1188-89 region, resurgent greenback buying interest is weighing on dollar-denominated commodities – like gold, which otherwise should have gained further traction on the back of safe-haven demand amid prevalent risk-off sentiment, as depicted by negative sentiment around European equity markets. Moreover, growing expectations of faster Fed rate-hike outlook in 2017 is further denting demand for non-interest-bearing yellow metal and restricted any swift recovery from the lowest level since February
After failing to sustain early move beyond 50-day SMA and 1.2500 handle, the GBP/USD pair came under renewed selling pressure and has now dipped below 1.2400 handle, erasing tepid recovery gains posted in the previous three sessions Currently trading marginally below the said handle, the pair snapped three consecutive days of tepid recovery gains and reversed over 130-pips from the highest level since Nov. 11 touched during early Asian session on Monday. Spot prices lost further ground in the past hour amid resurgent greenback buying interest on growing expectations of faster-than-expected Fed rate-hike action, beyond December meeting.
Research Team at Goldman Sachs, takes a note that Copper prices have rallied sharply and net speculative positioning has reached its highest level since 2005 over the past two months.
The greenback, in terms of the US Dollar Index , has almost fully recovered the initial pullback, currently hovering over the mid-101.00s. US Dollar well supported near 100.70/60 The index has once again found strong support in the 100.70/60 band, and has not only retaken the 101.00 mark but also advanced to the area of 101.50, testing the positive territory for the time being. The broader picture around the dollar remains unchanged so far, with expectations of a rate hike in December still sustaining sentiment, albeit market participants should have already priced in the event.
Shaun Osborne, Strategist at Scotiabank, notes that they see GBP/USD consolidating ahead of another push lower, rather than rebounding at this point.
Among the most traded pairs of the currency market, the AUD/JPY was the best performer during the week. The pair gained more than 250 pips since Monday and posted the third weekly gain in a row
Next week, many relevant economic reports will be released in the US, among them, the most important will the official employment data.
After falling more than 200 pips during two consecutive weeks, EUR/USD managed to stabilize and it was about to end the week around 1.0600, marginally higher from the levels it had a seven days ago. The decline found support above 2015 lows that lie at 1.0460. The pair bottomed at 1.0516 (fresh 2016 low) and bounced to the upside on Friday, amid a correction of the US dollar in the currency market. “The euro’s gains were more modest as the market expects the European Central Bank to extend/increase its quantitative program soon
The US dollar finished the week with mix results in the forex market. Against European currencies ended lower but it continued to rally versus the yen, that boosted the DXY. The Dollar index dropped 0.30% on Friday but ended the week up 0.25%. The index rose for the third consecutive week and consolidated above the 100.00 handle.
Research Team at Societe Generale, suggests that after completing a 5-wave up cycle (according to Elliott Wave Principles) at $1375 last July, just shy of the 38.2% retracement of the 2011 to 2016 down trend, Gold has embarked on an intermediate correction which accelerated following the confirmation of a Head and Shoulder pattern below $1250/1255.
Final data for Q3 GDP showed the German economy grew by 0.2%, down from 0.4% and 0.7% in Q2 and Q1 respectively as noted by the Research Team at ANZ. Key Quotes “The underperformance was concentrated in a 0.6% q/q drop in machinery and equipment investment and softness in the external sector. Exports fell 0.4% q/q and net trade subtracted 0.3% from growth.” “The November IFO survey came in as expected at 100.4, unchanged from October
The USD/JPY pair extended its retreat from multi-month peaks after a fresh selling wave gripped the US dollar amid retreat in the treasury yields. USD/JPY awaits fresh impetus The USD/JPY pair trims gains and now hovers near the mid-point of 113 handle, after having dipped to daily lows of 113.38
The Wall Street Journal ran a story on the Chinese currency this Thursday, in light of the ongoing weakness in the Yuan against its American counterpart.
In an interview with the New Statesman magazine, published by the Australian Financial Review (AFR) today, former UK’s Prime Minister Tony Blair noted that Brexit could be stopped, urging the government to keep its options open on a second referendum. Key Quotes: “People may then say, ‘Well, hang on, why are we leaving then?’ Or alternatively, you’ll be out of the single market and the economic pain may be very great, because beyond doubt if you do that you’ll have years, maybe a decade, of economic restructuring”
In the US, after the NFP, the Factory Orders reports was released (+1.9%). According to analysts from Wells Fargo, the data continues to show that the manufacturing sector is struggling to get its footing. Key Quotes: “Factory orders notched a modest 1.9 percent gain in July.
According to analysts from Danske Bank, the main event next week is the European Central Bank meeting. Also, retail sales, Sentix Investor Confidence and German industrial production data will be released. Key Quotes: “In the euro area, the main event next week is the ECB meeting on Thursday
The Mexican peso rose sharply against the US dollar on Friday and erased weekly losses. USD/MXN is about to end the week near 18.50 after trading close to 19.00 just two days ago. The pair fell from 18.75 to 18.53 after the US employment report.
GBP/USD posted the highest weekly close since early July supported by a stronger pound that was among the top performers in the currency market. On Friday GBP/USD kept gains despite the reversal rally of the US dollar against European currencies and the yen.
Another election looms in Spain after acting PM Mariano Rajoy lost the second parliamentary vote of confidence.