US jobs slowdown continues
The US dollar index has tentatively rebounded after hovering near its lowest level since early October. Yesterday, the buck was dragged down by the slide in front-end Treasury yields following the release of the delayed US jobs data.
US non‑farm payrolls rose 64k in November, modestly above consensus, but October’s sharp downward revision left the three‑month average at just 22k. The unemployment rate climbed unexpectedly to 4.6%, the highest since 2021, underscoring labour‑market fragility and validating the Fed’s recent rate cut. This backdrop keeps traders positioned for two further rate cuts in 2026, reinforcing downside risks for the dollar.
Retail sales provided a brighter note, with October’s control group up 0.8%, signalling household demand remains resilient. Yet with jobs data softening and consumption holding up, the next inflation release will be pivotal in shaping Fed expectations — and near‑term USD direction.
USD/CAD fell to its lowest since mid September with potential brewing for an extended slide towards the 200-week exponential moving average around 1.3640. However, having dipped into oversold territory on the daily chart, a period of consolidation or modest rebound is to be expected as traders gear up for the US CPI report due on Thursday.
Euro pulls back from $1.18 peak
The euro briefly touched $1.18 yesterday — its highest level versus the dollar since late September — before retreating as renewed USD demand followed a heavy data slate. While the European Central Bank (ECB) is expected to hold rates steady at 2% on Thursday, growing acceptance that the easing cycle is complete suggests downside for EUR/USD may be limited.
Across the Atlantic, November’s US jobs report showed resilience but signs of slowing, tempering dollar strength. In Europe, the composite PMI slipped to 51.9, dragged lower by Germany’s industrial weakness, though France surprised with its strongest factory growth in over three years. Meanwhile, Germany’s ZEW expectations index jumped to 45.8, the highest since July, hinting at improving sentiment despite near‑term softness.
Oil’s plunge to four-year lows weighs on Aussie, CAD
Yesterday, sharp losses in crude oil markets pressured commodity currencies.
The benchmark WTI crude oil price fell 2.8% to its lowest level since 2021, hitting USD55 per barrel.
The decline came amid hopes for a peace deal between Russia and Ukraine. US President Donald Trump told reporters an agreement could be “closer than ever.”
The AUD/USD fell for a fourth consecutive day, slipping 0.1%. The Canadian dollar dropped 0.4% from recent three-month highs against the US dollar.
Interestingly, the US dollar is currently disconnected from oil and gold prices, a clear contrast to most of the year. A near-zero correlation shows little direct linkage between these markets.
UK inflation adds to BoE easing bets
UK inflation fell to its lowest level in eight months, undershooting expectations and reinforcing the case for a Bank of England (BoE) rate cut on Thursday. The pound is reeling, pulling back sharply from 2-month highs yesterday and trading closer to $1.33 versus the USD once again.
Headline CPI eased to 3.2% versus a 3.5% forecast, down from 3.6% previously, while services inflation slipped to 4.4%. The softer readings strengthen the argument for a 25bp reduction, which would bring Bank Rate to 3.75% and likely push 2‑year gilt yields below that threshold. Traders are now pricing in around 68 basis points of easing by the end of 2026, from 58 on Tuesday. Sterling has already weakened, dropping 0.8% against the USD this morning. The rate‑ and yield‑driven bearish narrative for GBP remains intact as markets look ahead to 2026.
Sterling briefly recovered on Tuesday, helped by stronger than expected UK PMI data and disappointing US data. The UK’s composite PMI jumped to 52.1 in December’s flash estimate, up from 51.2 the previous month. It was one of the strongest readings this year and driven by an accelerating services sector and the strongest increase in factory output in 15 months. The survey may alleviate some concerns at the BoE that the economy has lost considerable momentum since a strong first half of the year.
However, with the unemployment rate rising to an almost 5-year high, wage growth cooling and inflation decelerating faster than expected, we wouldn’t be surprised to see a dovish tilt in the BoE vote split on Thursday, which doesn’t bode well for the pound.
Market snapshot
Table: Currency trends, trading ranges and technical indicators
Key global risk events
Calendar: December 15-19
All times are in EST
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
