Spreadex Market Update
USD Sinks On Unexpected US Wage-Growth Weakness
The US Dollar fell sharply on the back of Friday’s December US labour reports. While the NFP came in above forecasts at 223k vs 200k expected and the unemployment rate was seen falling unexpectedly from 3.7% back to 3.5%, it was the average hourly earnings data that garnered the most attention. Wage growth dropped to 0.3% from 0.4% prior, fuelling hopes that inflation will have cooled again last month. Traders now await the latest US CPI data due on Thursday which will be the key US data for the week.
Key Factors for Today
- USD falls as wages growth weakens in December – attention turns to CPI on Thursday
- Markets rally on weaker USD as peak-inflation story gathers pace
- China ease border restrictions for first time in 3 years
- Risk FX rallies on USD drop – JPY weaker on reduced safe-haven demand
- Crude and metals turn higher – gold hits fresh highs
Coming Up
- EUR – Unemployment rate
- CAD – Building permits
- USD – Consumer credit
Equities Higher on US Wages Fall
Equities markets cheered the unexpected weakness in US wages-growth on Friday. Indices were seen higher across the board with most finding a fresh bid across the European open on Monday. The FTSE broke out to its highest level since 2019 while the Nikkei was seen reversing sharply off the lows, suggesting room for a further recovery. US CPI will be the key this week. Traders are also monitoring the China reopening story with the country removing quarantine requirement for inbound travellers for the first time in three years as of Sunday. However, concerns over rising covid levels are providing a counterweight to the full-blown optimism we might have seen otherwise.
Risk FX Sees Strong Rally
The fall-back in USD has been welcomed by higher-beta FX with AUD and NZD leading the way across the European open on Monday. Both currencies have seen strong gains against the Dollar while GBP has also seen fresh demand. AUDUSD is now up over 3% off Friday’s lows, trading at its highest level since August.
JPY Weaker As Safe-Have Demand Dries Up
Meanwhile, JPY has come under fresh selling pressure on Monday. The uptick in risk sentiment has seen heavily reduced safe-haven demand for the Yen which has been the weakest performer so far today, after USD. Japanese markets are offline for a bank holiday there meaning the currency is vulnerable to further losses later today as domestic flow rejoins the market and plays catch up.
Metals and Oil Higher as USD Falls
In the metals and commodities space, both gold and silver have been seen higher on the back of Friday’s data with gold in particular seen breaking out to its highest level since May 2022. Both metals look poised for further gains should USD weakness continue this week. Crude prices are also turning higher on the back of Friday’s data. Crude futures have managed to bounce off the lows and are now close to retesting the broken September lows around the $76.50 mark.
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