Weekly recap: Data still in focus after NFP

US dollar ended last week’s trading in the uptrend with modest gains. This movement coincided with rising indices in Wall Street and other global stock markets. Markets were driven by different developments, including mixed economic data, political developments in Europe and the Middle East, and some monetary policy-related implications.

Jobs Data

The release of US employment data in the heart of market attention. Jobs readings released  last week suggested that the US job market was in great shape last November. They reflected continuous increase in  jobs and wage growth to an extent that surprised markets when they revealed a significant increase in the number of jobs added by the US economy and a substantial rise in wage growth far exceeding market expectations.

US labor market showed resilience in November, with non-farm payrolls increasing by 227,000 jobs, according to the Bureau of Labor Statistics (BLS) report released on Friday. This strong figure was beyond market expectations of 200,000 jobs and significantly surpassed October’s revised increase of 36,000 jobs, which was initially reported as only 12,000 jobs.

Stronger-than-expected data underscore sustained recovery in employment, reflecting the ongoing strength of the US economy despite broader global uncertainties. The upward revision for October, combined with impressive growth in November highlights continued demand in key sectors and indicates that the labour market is still gaining momentum as the year comes to an end.

Investors and policymakers are closely examining these figures as they could influence projections for the Federal Reserve’s monetary policy. The recent numbers might counter previous signals of labour market weakness, adding complexity to forecasts for potential interest rate adjustments in the coming months.

The data signalled that the Federal Reserve still needs to lower interest rates further, suggesting a continuation of the current easing approach in monetary policy. The environment of low borrowing costs presents greater opportunities for financial growth for companies and businesses, fostering economic activity. These forecasts led to an increase in risk appetite in the markets following the release of data highlighting the potential for the central bank to lower borrowing costs even more in the near future.

US Dollar

The greenback ended last week in the uptrend buoyed by employment indicators and developments in the Middle East. This came against the backdrop of tensions in Syria, following the Syrian opposition’s advance and takeover of the capital, Damascus, leading to President Bashar al-Assad fleeing the country.

These events escalated to the point where Russia announced that president Bashar al-Assad had “stepped down” and “left Syria” just hours after opposition forces took control of the capital. Undoubtedly, these developments served as a major alert, causing risk aversion in financial markets due to anticipation of further changes in the Syrian situation. The involvement of numerous regional and international parties in the Syrian crisis, including Hezbollah, which recently signed a ceasefire agreement with Israel, as well as Iran and Russia, allies of Bashar al-Assad, added to the uncertainty. Deterioration in risk appetite due to these tensions resulted in an upswing for the US dollar achieving a modest weekly gains.

Wall Street Shares

US stocks ended last week higher buoyed by expectations of further interest rate cuts in the near future, particularly after economic data — specifically US employment data —highlighted continued improvement in the labour market. This data raised expectations for lower interest rates, which would reduce borrowing costs.

As a result, risk appetite improved as companies are anticipated to be able to borrow more affordably in the near future, leading to greater financial growth and making their stocks more attractive to investors.

EURUSD and French politics

Marine Le Pen, leader of the far-right National Rally party in France, stated that last Wednesday’s events—referring to the National Assembly’s vote of no confidence in Michel Barnier’s government—do not necessarily require the resignation of French President Emmanuel Macron.

The political crisis in France began after Prime Minister Michel Barnier was ousted following the French parliament’s vote of no confidence, triggered by the use of a constitutional tool allowing the government to take certain actions without parliamentary approval.

According to Reuters, President Emmanuel Macron is expected to appoint a new prime minister by next Saturday, emphasizing his intention to remain in office until the end of his term in 2027, despite calls for his resignation.

The National Assembly’s vote of no confidence in Michel Barnier’s government marks the first time a government has been ousted by such a vote since 1962.

The euro may have avoided a decline following the vote of no confidence in the French government, as uncertainty surrounding the political crisis diminished after the prime minister’s ouster and anticipation of political measures to be taken by President Macron to form a new government.

The Pound and UK data

British pound has made gains for the third consecutive week. The rise in the week ending December 6th was driven by economic data reflecting an improvement in the UK housing sector. The UK Construction PMI increased to 55.2 in November from 54.3 in October, surpassing market expectations of 53.4.

This reading highlights significant growth in the sector, although the report revealed mixed results across different sub-sectors. Commercial construction achieved its highest growth in two and a half years. Conversely, residential construction fell to its lowest level since June, with home-building activity declining due to higher interest rates and weak consumer confidence.

This week’s insight

US inflation data is set to be the primary influence on financial markets in this week, with consumer price readings (CPI) expected on Wednesday, along with wholesale sales and import prices. Additionally, important employment data, including weekly jobless claims and producer price inflation figures, will provide insights into market sentiment regarding small businesses in the country, making these data points key drivers of asset prices in global financial markets.

Quarterly earnings reports for Q3 2024, including those from GameStop, Oracle, and Costco Wholesale, are also anticipated to significantly shape market movements this week.