Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Hot US jobs result sends Aussie to lows
The US dollar shook off last week’s losses and the USD index rebounded from one-month lows after a strong US jobs report boosted the world’s most traded currency.
The November non-farm employment report rebounded from last month’s hurricane-affected 12k figure with a 227k result versus 215k expected. The unemployment rate climbed from 4.1% to 4.2%.
Despite the job gains, market bets on further Federal Reserve rate cuts increased, with the probability of a 25-basis point rate hike on 18 December climbing from 77% before the release to 84% after (source: Bloomberg).
Most markets lost ground versus the USD, but the hardest hit were the commodity currencies, with the AUD/USD falling 1.0% as it ended at the lowest closing level for 2024.
The NZD/USD fell 0.9% while the USD/CAD jumped 1.0% after a poor Canadian jobs report.
In Asia, the USD/CNH gained 0.3% while USD/SGD climbed 0.4%.
Central bank decisions drive this week
FX markets face a packed calendar of central bank meetings this week with policy announcements from the Reserve Bank of Australia (RBA), Bank of Canada (BOC), and European Central Bank (ECB).
The RBA kicks off on Tuesday (14:30 AEDT), where we expect rates to remain unchanged at 4.35%. The focus will be on forward guidance amid mixed economic signals.
The Bank of Canada rate decision follows on Thursday (01:45 AEDT), with consensus looking for rates be lowered to 3.25%. Markets will watch for any shift in policy stance given recent economic data.
The ECB closes out the central bank meetings on Friday (00:15 AEDT). The deposit rate is expected to be lowered by 25bps, but guidance on future policy path will be key.
US CPI on Thursday is the week’s highlight whereas Friday brings US PPI data. Key Asian data includes Australia’s jobs report (11:30am AEDT Thursday).
US core CPI stickiness drives dollar moves
US CPI will be released this Thursday (00:30 AEDT).
At 0.281% m-o-m in November, core CPI inflation was probably still high and virtually stayed the same from 0.280% in October. Inflation for core items seems to have picked up speed in November. Even while the rate of growth in used car prices slowed, we anticipate that clothing prices will rise sharply in November following a surprise October decline, most likely brought on by an early shift in holiday season discounts.
We project core PCE inflation in November to be 0.245% m-o-m based on our CPI and PPI forecasts. We believe that our prediction of a December rate cut skip is in line with our CPI projection.
Dollar index is up 4.5% YTD and short term price action is slightly negative. Chart shows strong correlation between US dollar index and bond yields, both which have reversed from peaks.
Aussie crosses retreated as RBA meeting looms
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 9 – 14 December
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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.
