Market Drivers – US Session, Dec. 7

Mohamed Abdelhamid 8 December, 2023 2:45 am Commodities, Forex Market, Market Update

The key event on the economic calendar will be the US official employment report. Before that, during the Asian session, Japan’s data is due, including GDP, current account, and the trade balance. The Bank of England will publish the Consumer Inflation Expectation survey.

Economic Data

Data released on Thursday showed that Initial Jobless Claims rose to 220,000, slightly below the market expectation of 220,000, while Continuing Claims dropped sharply from 1.925 million to 1.861 million, below the expected 1.919 million. The figures briefly boosted the US Dollar, but the impact was limited. The economic data released during the week had a modest impact, likely because it did not significantly alter expectations regarding the Federal Reserve’s decision next week, including its guidance.

Key Developments

The US Dollar Index (DXY) dropped 0.60%, sliding from 104.20 to 103.50. The 10-year Treasury yield initially moved higher but pulled back during the American session from 4.17% to 4.11%.

EUR/USD rose modestly, supported by a weaker US Dollar, and settled around 1.0800. The final reading of the German November Consumer Price Index is due, which is expected to confirm the preliminary reading of annual inflation at 3.2%.

GBP/USD held above the 20-day Simple Moving Average (SMA) and rose to the 1.2600 zone. The Bank of England Consumer Inflation Expectation survey is due.

The Japanese Yen had its best day in a month, rising across the board after Bank of Japan (BoJ) Governor Ueda discussed policy options after exiting the current monetary policy stance. Developments around USD/JPY moved at an impressive pace, with the pair’s long-term target hit within hours. It rebounded from 141.50 to 143.60. After the significant decline, some consolidation could take place. On Friday, data to be released from Japan includes Labor Cash Earnings, Current Account, Q3 GDP, and trade balance.

The Swiss Franc lost momentum during the American session but previously reached the highest level against the Euro since January 2015, with EUR/CHF failing to break above 0.9420 after rising towards 0.9460, as markets anticipate the ECB cutting rates more times than the Swiss National Bank (SNB) in 2024. USD/CHF ended the day flat, hovering around 0.8750.

The Canadian Dollar failed to benefit from a weaker US Dollar, with USD/CAD holding around 1.3600 and closing the day flat, likely affected by subdued crude oil prices.

Gold continues to trade sideways around the $2,030 level, supported by the $2,020 area and limited on the upside by $2,040. Silver hit a fresh low at $23.58 and trimmed losses, rising to $23.80, but the bias remains on the downside.

What to watch on Friday?

The official US employment report is due on Friday. Payrolls are expected to increase by 180,000, which would be an acceleration from the 150,000 recorded in October. The Unemployment Rate is expected to remain steady at 3.9%. The report could add to evidence of a more balanced labor market. A significantly positive surprise could trigger further gains for the US Dollar, while a negative report could weaken the currency. However, despite these fluctuations, the economic outlook for the US remains stronger than that of European countries.

The other major event of the week will be the preliminary December reading of the University of Michigan Consumer Sentiment Index.

Also Read:
EUR/GBP exhibits mixed performance amid Eurozone GDP miss