Financial markets are relatively calm this morning as investors look ahead at this week’s key events and data releases.
During the previous week US NFP rose by 227K, following the 36K increase in October and above 200K market expectations. Initial reaction was mixed, negatively impacted by the higher-than-expected unemployment rate and softening the dollar.
This morning the DXY index clings above 106.00 ahead of key US CPI data coming out on Wednesday. As we enter the Fed blackout period before the FOMC meeting on 17 December, and uncertainty over a cut or pause from the Fed, market makers will closely watch this data, where CPI is forecasted to slightly improve.
After softer US data on Friday, the single currency reached three weeks’ highs above 1.0600 before edging lower to current levels around 1.0560.
Later in the week, the ECB will conduct its last policy meeting of the year, with wide expectations of a 25bps cut.
Still being played out is the French government collapse, after a no-confidence vote in PM Michel Barnier. The country is now plunged into a political crisis and has forced French President Emmanuel Macron to bolster confidence in his nation and appoint a new government.
Cable fluctuates near 1.2750 as markets remain risk-averse due to geo-political risks and ahead of US CPI data.
It will be a dollar story for the pair this week as a lack of UK data will have the pair oscillating around the 1.2750 mark and above the key support of 1.27 until we hit US inflation data on Wednesday.
With the BoE expected to be among those central banks following a more gradual policy-easing cycle, we expect a 25bps cut on 19 December.
World News
Over the last few days, we’ve seen the collapse of President Bashar al-Assad’s regime in Syria as rebel forces seized the capital of Damascus and ended the Assad family’s rule of the country after more than 50 years.
During this transition period, world leaders are waiting to see who will fill the power vacuum. US forces have aimed to prevent ISIS and other terror groups from taking advantage of this fragile time, and President Biden stated he would “engage with all Syrian groups” to support a more democratic future for the country.
