US Dollar

The US dollar has risen around 6% from the late December low. And with bond prices approaching support which could send yields lower, the US dollar rally could at least find some headwinds - if not a retracement.

The US dollar is sitting in the middle of its 3-month range with leading indicators pointing toward slightly above expectation reading in this month’s NFP report, with headline job growth in the 200K-250K range.

Data since the Pandemic shows that NFP job growth has generally outperformed estimates and seen the prior figure upwards revised, which has played out well for US dollar bulls.

After slipping for the past three weeks, the US Dollar Index is testing key previous support at the 103.00 level, potentially setting the stage for a bounce on solid jobs data.

Gold has been resilient so far in 2024 even as USD strength re-appeared. The big question now is whether bulls can find a more favorable outcome on tests of resistance at $2,032 or $2,050.

The U.S. Dollar set another fresh high yesterday, extending the bullish structure that’s priced in so far this year.

The U.S. Dollar broke out and set another fresh 2024 high this morning as the currency continues to claw back Q4 losses.

How interest rate differentials, scarcity, and falling liquidity could work together to boost the US dollar

Today’s payroll data reiterated the run of strong labor market data with wages growing at 4% a key concern for the Fed. Futures markets reduced the probability of early rate cuts, but traders made few changes to their bullish stance on equities, bonds, gold or the dollar.

EUR/USD was range-bound for much of last year but there were still multiple shorter-term trends to pick on. With markets geared up for cuts to begin this year, could EUR/USD push into a larger-scale trending condition?

The Dow Jones has quickly shaken off yesterday’s late losses is challenging record highs despite the comedown of the Fed minutes yesterday. The market remains optimistic over the state of the US economy, supported by today’s various jobs sector data releases; the flip-side is that too much strength could slow the pace of interest rate cuts with the Fed “likely at or near its peak rates” according to December policy meeting minutes yesterday. The Bitcoin rally will be tested pretty soon, as the SEC is intended to approve (or not) Bitcoin ETFs.

Oil prices appear to have found support at $70 per barrel, with news of US stock building, further OPEC+ production cuts and Middle East tensions spurring buying action. The Fed’s December meeting minutes were cagey on the outlook for interest rates in 2024. JOLTS labor market data pointed to further weakness, good news for inflation.

Equity, bond, and gold investors are pricing in large rate cuts in 2024, starting in March, but this week’s jobs data could spoil the fun. A bullish December for stocks might have pulled forward the typical January rally, spurred by the belief that the Fed is about to pivot. US Treasuries sold off in morning trade, with worries about the appetite to digest the major volume of new issues. There is some risk of disappointment in the interest rate outlook, notably with commodity prices indicating persistent inflation so there is less chance of a rate-cutting bonanza.

The Russell 2000 was again the strongest US index, continuing a trend evident for two months. Gold prices touched $2,082.5 per ounce this morning, buoyed by a mixture of risk aversion and the anticipation of lower interest rates. This morning’s economic data showed strong durable goods demand and a modest decline in a key inflation gauge, the ‘PCE deflator’, generally supporting rate cuts early next year.

US equity markets bounced back in morning trade, again led by the Russell 2000, after yesterday’s worries about the pace of rate cuts, as traders ignored anything but a rosy rate cutting in 2024. Oil prices slipped, down 1.3%, despite various indications that oil output will be cut next year by Saudi Arabia and Russia, the world’s top two producers.

Consumer confidence rose sharply in December, casting a shadow on early rate cuts and stalling the recent equity market rally aside from continued strength in the Russell 2000. Equity markets and gold still look set to end the year on all-time highs, Bitcoin has close to doubled, with interest rate optimism seemingly pulling forward the traditional January rally.

EUR/USD has tested the 1.1000 handle twice over the past month and hasn’t yet been able to leave it behind. But bulls look ready for a third round and there’s some big drivers on the calendar for Friday.