It has been another rough
trading week for the Dollar as a ‘patient’ Federal Reserve fuelled speculation
over a possible pause to US monetary tightening this year.
Friday’s main risk event
for the Greenback and potential market shaker will be the US jobs report for
January, which should offer fresh insight into the health of the US labour
force. With the US economy facing multiple headwinds in the form of fading
fiscal stimulus and lagged effects of last year’s aggressive monetary policy
tightening, today’s jobs report will certainly attract extra attention. Markets
project the US economy to have created 165k jobs in January, with average
earnings down by 0.3%, while the unemployment rate is predicted to remain
steady at 3.9%.
There is a risk of the US
jobs report printing below expectations, especially when considering how the
35-day government shutdown is seen distorting some key figures – with
unemployment in mind. While every section of the report is of significant
importance, investors will be keeping a very close eye on wage growth. Signs of
wage growth struggling to accelerate is poised to stimulate concerns over
subdued inflationary pressures, a point the Federal Reserve made in January’s
FOMC policy meeting.
The Dollar’s depressed
price action this week suggests that bulls are tired and clearly in trouble. A
disappointing jobs report should place bears back in the driver’s seat with the
Dollar Index seen sinking towards 95.00. A solid weekly close below the 95.00
level should encourage a steeper decline towards 94.20.
Commodity
spotlight – Gold
Gold has shone with great
intensity this week reaching levels not seen in eight months thanks to a dovish
Federal Reserve, geopolitical risks and a broadly weaker US Dollar.
The yellow metal concluded
January on an incredibly positive note with prices trading around $1,321 as of
writing. Market expectations over the Federal Reserve taking a break on rate
hikes and persistent concerns over slowing global growth are themes that will
ensure Gold remains in fashion. Appetite towards the precious metal could
receive another boost this afternoon if the US jobs report is unable to meet
market expectations.
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