Market sentiment is cautious ahead of the key US employment report, with mixed data from major economies and limited geopolitical or trade news adding to the uncertainty. Despite Fed Chair Jerome Powell's hawkish remarks, which continue to support the US Dollar, early employment signals look weak.
The US Dollar Index (DXY) saw its biggest drop of the week, weighed down by disappointing US Jobless Claims and Challenger Job Cuts, which raised doubts about the strength of the US labor market. The lack of change in market expectations for a Fed rate cut in December also pressured the Greenback.
This weakness allowed Gold and major currencies like EUR, GBP, and JPY to recover. However, Antipodean currencies (AUD, NZD, and CAD) and Crude Oil remain under pressure, despite a positive OPEC+ update. Meanwhile, Cryptocurrencies continue to show strength, while equity markets take a pause ahead of major upcoming events.
Softer US Dollar allows EURUSD, GBPUSD and USDJPY to pare previous moves.
Disappointing Eurozone and German data, along with French political turmoil, weigh on EURUSD bulls, especially with a dovish European Central Bank (ECB) outlook.
GBPUSD also struggles for upside momentum as Bank of England (BoE) policymaker Megan Greene highlights inflation pressures and weak growth, while the BoE's November Decision Maker Panel (DMP) survey shows mixed signals.
USDJPY remains lower as Bank of Japan (BoJ) policymaker Toyoaki Nakamura signals a cautious approach to rate hikes, emphasizing data dependency.
Fears that China won't announce major stimulus in December, along with economic struggles in commodity-using countries, are weighing on the Australian, New Zealand, and Canadian Dollars. Concerns about potential rate cuts from the Bank of Canada (BoC) and economic challenges in Australia and New Zealand add further pressure.
As a result, AUDUSD and NZDUSD are set for significant weekly losses, while USDCAD is poised for a second consecutive weekly gain ahead of Canada's jobs report.
Gold prices should have gained from the US Dollar’s retreat, but lack strength due to hawkish Fed signals. Mixed geopolitical tensions, trade war concerns, and market indecision ahead of key events also challenge XAUUSD buyers.
OPEC+ stuck to market expectations by postponing the output increase until April 2025, but the news failed to boost Crude Oil prices. The "sell the fact" sentiment prevailed, particularly with ongoing concerns about weak demand from China.
Bitcoin (BTCUSD) and Ethereum (ETHUSD) are on track for strong weekly gains, despite pulling back from recent highs the previous day. The rally is supported by Donald Trump's push to ease crypto trading, significant ETF inflows, and bullish on-chain data.
With traders pricing in a nearly 70% chance of a Fed rate cut in December, despite hawkish comments from Fed Chair Jerome Powell, today’s US employment data for November will be key. Nonfarm Payrolls (NFP) are expected to jump from 12K to 200K, but the Unemployment Rate may tick up to 4.2% from 4.1%. Average Hourly Earnings might slow to 0.3% month-on-month and 3.9% year-on-year, down from 0.4% and 4.0%, respectively.
Along with the jobs report, the University of Michigan’s (UoM) Consumer Sentiment Index and inflation expectations for December will also impact the US Dollar. Consumer confidence is expected to rise to 73.0 from 71.8, while 1-year and 5-year inflation expectations may stay around 2.6% and 3.2%.
If the US data beats expectations, the US Dollar could recover, even with a likely rate cut in December. This could halt the recent recoveries in gold and major currencies, while pushing down Antipodean currencies. Further, crude oil could stay under pressure unless markets reassess the OPEC+ verdict and the US Dollar weaken, while cryptocurrencies may rise on optimism fueled by Trump’s recent support.
Elsewhere, the Eurozone's revised Q3 GDP and Canada’s November jobs report could influence momentum traders. The EU data may not move EURUSD unless the US Dollar weakens. The USDCAD may edge higher, reflecting mixed expectations for Canada’s jobs report and the Bank of Canada’s dovish stance, along with lower crude oil prices.
May the trading luck be with you!
