Surprise! The US economy added over 250,000 new nonfarm jobs last month, bringing the unemployment rate down to 4.1%. Wages also saw faster growth than expected, with workers earning 4% more on average compared to a year ago. Additionally, strikes at US ports have been paused until mid-January, allowing goods to be moved without interruption.
The US treasuries experienced heavy selling on Friday, causing the US 2-year yield to jump 25 basis points. This shift indicates that the Federal Reserve’s decision to cut rates by 50 basis points last month may have been a mistake. As a result, the probability of another 50 basis point cut in the November meeting has dropped to 0, with a 25 basis point cut now being the likely scenario.
Consequently, the US dollar index surged more than 2.5% last week, surpassing the 102.50 level. A decisive move above this level could signal a medium-term bullish consolidation zone and pave the way for further recovery.
In contrast, the EURUSD fell below the 1.10 psychological support and the major 38.2% Fibonacci retracement level. This decline, both technically and fundamentally driven, suggests a weaker euro in the near term. The pound sterling also faced pressure as the Bank of England hinted at potential rate cuts. While the NZDUSD and USDJPY are experiencing their own fluctuations due to central bank decisions and political factors.
The upcoming US inflation report on Thursday is expected to impact the market sentiment. While the US dollar is currently strong, any unexpected inflation figures could shift the Fed’s stance on future rate cuts. The earnings season, starting with big bank earnings this Friday, will also be closely watched as Q3 estimates have been revised downward.
Overall, the financial markets are in a state of flux, with various factors influencing currency movements and investor sentiment. It’s essential for investors to stay informed and consider their risk tolerance before engaging in foreign exchange trading or other financial activities.
