FX Daily: Investors buy dips but remain indecisive

US nonfarms and government shutdown deadline today
Philip Wee03 Dec 2021
    Photo credit: Unsplash Photo

    DXY did not deviate far from 96 this week. Omicron lifted EUR, the DXY’s heaviest component, from 1.12 last Friday only to be capped by Powell’s pivot on Tuesday. For a third session, EUR failed to break above its 20-day moving average around 1.1350. EUR is also facing volatility from pressure by Germany on the European Central Bank to come up with a plan to normalize its bond buying programme and return priority to reining in high inflation. JPY and CHF gyrated with stock markets and fluctuated around 113 per USD and 0.92 per USD respectively. GBP also vacillated around 1.33 caught between a Bank of England rate hike expected on 16 December and the UK-EU spat over Brexit.

    The US 10-year treasury yield is holding above 1.40% in anticipation of a better US monthly jobs report today. US nonfarm payrolls are expected to add 550k jobs in November, more than the 531k seen in October. ADP Employment added 534k jobs in November, more than the 525k consensus but less than the 570k the previous month. US initial jobless claims increased less-than-expected to 222k for the 26 November week; consensus had expected a bounce to 240k from 194k a week earlier. The unemployment rate is expected to fall to 4.5% from 4.6%, in line with the first drop in continuing claims below 2000k since mid-March.

    Caution remains in the stock market. The recovery of the S&P 500 Index stalled at last Friday’s close of 4595 and ended the overnight session at 4577, up 1.4% from Wednesday. Dow closed 1.8% higher to 34,640 from dip buyers around 34,000, the psychological support level in the second half of this year. However, the session’s high at 34760 was also the lowest point at last Friday’s meltdown. Apart from Omicron and data, the US is approaching a deadline to avert a government shutdown at midnight Friday. The House voted 221-212 to approve a continuing resolution to keep the government funded till 18 February 2022. The stopgap bill will now be put to the Senate where Vice President Kamala Harris holds the tie breaker vote.

    Philip Wee

    Senior FX Strategist - G3 & Asia
    [email protected]

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