Investors had to finally endure a bout of cold water on Friday after the latest US labour numbers signalled the Fed is unlikely to budge against rising speculation of an early rate cut in 2024. The dollar rose with higher yields just days ahead of the CPI and Fed events, even with inflation expectations falling.
Chart: GOLD
Job growth in the US took a decisive turn in November at nearly 200K and unemployment down by 20 basis points to 3.7%. Even as 1-year inflation expectations dipped to 3.1% from 4.3%, the twist came as consumer sentiment soared 8.1 points to 69.4 from 62 expected, contrasting with signs of earlier Fed cuts. The dollar rose on renewed optimism of later Fed cuts, sending gold retesting the $2K handle 1.20% lower. Below $2030, the risk of losing the round support remains increased. Meanwhile, construction employment outpaced overall employment at 2.2% vs 1.55% as mortgage rates keep falling.
The European shares market hit a 22-month high on Friday, boosted by bets of ECB peak rates as German inflation continued to fall and luxury giants gains. Coupled with a stronger dollar, EURUSD dropped to a 4-week low of $1.0725 Friday but remains largely in a range above there while trading below $1.08. Meanwhile, European Union Commissioner for Economy Paolo Gentiloni seemed confident on Friday that EU governments can agree on the bloc’s fiscal rules by the end of the year.
The US is planning a substantial purchase of 3 million barrels for its Strategic Petroleum Reserve (SPR) as part of broader efforts to refill its stocks below $70 per barrel. The announcement saw WTI rising over 2% to $71.70 on Friday and continues to impact prices early Monday, forming support at $70 per barrel. However, the US has stated that the buying process will be slow in a bid to reduce the impact on oil prices.
The property market in the UK is going through a bit of a rough patch, with asking prices dropping more than expected at 1.9% compared with 1.1% the year prior. However, it’s not all gloomy, as UK manufacturers show signs of recovery, according to Make UK. The Manufacturing Trade body said factories had to raise output three times in the last three months. Meanwhile, a Reuters poll last week showed that the BOE would stand pat against early cuts talk. Cable fell to $1.25 for a 3-week low on Friday but recoiled the largest part of intraday losses to $1.2546. Traders see no way out between the bottom and $1.26 as the pair appears to be flattening out in the longer term.