Dollar Drops on Soft Jobs Data and Monetary Policy Outlook

Dollar Drops on Soft Jobs Data and Monetary Policy Outlook


The dollar index which measures the greenback against a basket of major currencies dropped to a low of 96.36, the lowest since November 22nd, weighed down by weaker-than-anticipated jobs report. The report showed that the US economy created 155 thousand jobs versus an expectation of 200 thousand, while the unemployment rate held steady at 3.7%. The Average Hourly Earnings YoY was unchanged at 3.1%, the highest since 2009. The latest developments raised the chances that the Federal Reserve could pause the monetary policy tightening in 2019. The inversion of the yield curve warned investors about a possible economic slowdown. The US 10-year yields fell to a three-month low of 2.817%, and the 2-year yields remained higher than the 5-year yields. The USDJPY tumbled to a six-week low of 112.23, and the EURUSD rose to a three-week high of $1.1445.


US equity futures started the week with a gap lower on growing concerns over a global economic slowdown. Moreover, the recent developments in the bond markets push investors to reassess their portfolios and look for safer assets. The Dow Jones Industrial Average futures and the S&P500 futures traded at a six-week low of 24159 and 2610, respectively, while the Nasdaq futures declined to a two-week low of 6554.


The Canadian dollar strengthened against other major currencies on upbeat jobs data. The Canadian economy created 94.1 thousand jobs in November, and the Unemployment rate fell to 5.6% from 5.8% prior, despite the rise in the participation rate to 65.4% from 65.2%. The USDCAD traded at a low of 1.3254, and the EURCAD tested a low of 1.5100.


Metals prices rallied on weaker dollar and easing rate hike view. The gold ounce climbed 1% to a five-month high of $1250, the silver ounce rose 1% to $14.62, and palladium added 1.5% to $1228.


Oil prices surged as OPEC+ agreed on a supply cut of 1.2 million barrels per day starting from January. The Organization of the Petroleum Exporting Countries planned to cut 800,000 barrels per day. Meanwhile, Russia and other countries not affiliated with the group will cut 400,000 barrels per day. The West Texas Intermediate crude futures traded at a high of $54.20, and the Brent futures rose to a high of $63.67.

Major Economic Events

GMT Country Event Expectation Previous
9:30 UK GDP (YoY) (Q3) 1.6% 1.5%
9:30 UK Manufacturing Production (MoM) (Oct) 0.0% 0.2%
9:30 UK Industrial Production (MoM) (Oct) -0.4% 0.0%
15:00 US JOLTs Job Openings (Oct) 7.220 7.009


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