06/11/2023 - 08:48 UTCThe U.S. dollar posted a sharp decline against most major currencies on Friday, with the dollar index (USDX) down by 0.97% and reaching as low as 104.79. The move in the value of the dollar could be attributed to recent indications by the Federal Reserve that suggest a possible ending to the central bank’s rate hiking cycle. The case for a pause in the Fed’s aggressive monetary policy was also supported by the weaker than expected outcome of the non-farm payrolls report which signaled that the labor market is cooling down, something that could determine how the Fed moves forward from hereon.
According to the CME Group Fed Watch Tool, the possibility that rates will remain unchanged in December rose to 90.4% from 80.4% seen on Friday, while there is 9.6% chance for a rate hike.
On the European front, German factory orders were much higher than anticipated with investors now shifting their focus towards a series of PMI numbers for individual European countries and the eurozone as a whole. The Germany 40 that tracks the performance of the DAX future made a sharp recovery of 3.90% last week, supported by a series of solid earnings reports and a shift in central bank narrative, towards easing monetary policies. There is a series of ECB speeches this week, including one from President Christine Lagarde on Friday that could shed some light on the path forward. In the U.S., at least nine Fed members will testify this week, including two appearances by Chair Jerome Powell.
On the earnings front, Apple recorded a revenue loss for the last quarter, posting a 1% decrease from the previous quarter, with the price of the stock down by 0.54% for the day. The decline was not a surprise, however, total quarterly revenue exceeded forecasts of $89.28bn. In today’s calendar, BioNTech and RingCentral are scheduled to release their quarterly earnings reports.
The main highlight for Monday is the release of the Sentix investor confidence survey as an indicator of how market sentiment can impact future economic activity. In other news PMI reports are due from Germany, Spain, Italy and France, while the U.K. will release construction PMI figures.
On Friday’s session, the EUR/USD pair reached the 1.0730 level, ending the week with gains of 1.53% which is the best performance since mid-June. On Friday, the US reported that the US economy added fewer jobs than expected in October, while the unemployment rate increased to 3.9% and average hourly earnings increased lower than forecasted.
Moving ahead, marking participants now look to the release of the final Eurozone Services PMI, which might bring some volatility to the pair.
Gold prices gained on Friday as the U.S. dollar and Treasury yields slipped after weak U.S. jobs data cemented expectations that the Federal Reserve is done raising interest rates. Gold prices gained on Friday 0.38% but did not manage to end the week positive as the weekly loss was at 0.74%.
U.S. job growth slowed more than expected in October, while wage inflation cooled, pointing to an easing in labor market conditions. Traders are now pricing in a 90.4% chance that the U.S. central bank will leave rates unchanged in December compared to 80.4% the week before, according to the CME FedWatch tool. Investors also keep a tab on the Middle East conflict.
Oil prices settled almost 2% lower on Friday as supply concerns driven by Middle East tensions eased, while jobs data raised expectations the U.S. Federal Reserve could be done hiking interest rates in the biggest oil consuming economy.
A private sector survey on Friday showed that while China's services activity expanded at a slightly faster pace in October, sales grew at the softest rate in 10 months and employment stagnated as business confidence waned.
On the supply side, Saudi Arabia is expected to reconfirm an extension of its voluntary oil output cut of 1 million barrels per day through December, based on analyst expectations.
Wall Street's main stock indexes rallied on Friday as bond yields fell sharply after data showed signs of slowing U.S. jobs growth and an uptick in unemployment, boosting hopes that the Federal Reserve is done with its interest rate hiking campaign.
The Labor Department's report showed nonfarm payrolls increased by 150,000 jobs in October, much less than the expected 180,000 increase, partly due to strikes at Detroit's Big Three automakers.
The US 500 rose 1.10%, the US 30 0.71% and the US Tech 100 added 1.57% on Friday.
Ahead in the Week, investors will be watching trade balances data, wholesale inventories and trade sales, as well as preliminary Michigan consumer sentiment and expectations.
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