Dollar Ends Mixed on Strong Payrolls, Soft ISM PMI

USD/JPY Slides, GBP, NZD Outperform; Yields Climb

Summary:

Mixed US economic data saw the Dollar end mixed against various Rivals in choppy Friday pre-weekend trade. Non-Farm December Payrolls saw an addition of 216,000 jobs, beating median estimates of 170,000 and 173,000 in November. The Unemployment rate was unchanged at 3.7%.

The US ISM Services PMI Survey, however, saw a fall in December to 50.6 from 52.7 in November, and lower than economist’s expectations at 52.6.  Wages (m/m) were unchanged at 0.4%.

The Dollar Index (USD/DXY), which measures the value of the Greenback against a basket of 6 major currencies finished flat at 102.45.  Earlier, the USD/DXY traded to an overnight high at 103.10.

Sterling (GBP/USD) outperformed, climbing 0.25% against the US Dollar to 1.2720, up from Friday’s open at 1.2680. Sterling also rose against the Euro, the EUR/GBP cross rate fell to 0.86 from 0.8635.

Better-than-expected UK Construction PMI, up at 46.8 from 45.5 previously lifted the British currency. The UK Halifax House Price Index also beat forecasts, rising to 1.1% from 0.6%.

The Euro (EUR/USD) dipped modestly to 1.0938 from 1.0945 previously. The shared currency finished lower against the British Pound. The EUR/GBP cross rate slipped to 0.8605 from 0.8625.

New Zealand’s Kiwi (NZD/USD) also outperformed, rallying to 0.6245 from 0.6225 Friday. The Kiwi also benefitted from a rise in the Global Dairy Trade Index, up 1.2% to start 2024.

The Australian Dollar (AUD/USD) was little changed, settling at 0.6710 (0.6712 Friday). The Aussie Battler had a volatile session, trading between 0.6640 overnight low, and 0.6748 overnight high.

Global bond yields rose. The benchmark US 10-year bond yield finished up 6 basis points to 4.05%. The UK 10-year Gilt yield climbed to 3.78% from 3.72% previously. Japan’s 10-year JGB rate was unchanged at 0.60%. Australia’s 10-year bond yield rose to 4.13% (4.05% Friday).

Other data released saw the Eurozone November PPI (y/y) climb to -8.8% from -9.4%. The Eurozone’s Headline Flash Inflation Rate in December (y/y) dipped to 2.9%, against expectations at 3%.

US November Factory Orders (m/m) rose to 2.6%, beating forecasts at 2.1%. Excluding Transportation though, Orders for US Factories eased to 0.1% against estimates at 0.2%.

• GBP/USD – Sterling soared to an overnight high at 1.2771 from Friday’s opening at 1.2677 before slipping to 1.2720 at the close of trade in New York. In volatile trade the British Pound tumbled to an overnight low at 1.2611. The British Pound rose on stronger economic data.
• USD/JPY – Against the Japanese Yen, the Greenback finished little-changed at 144.55 (144.60 Friday). Trade though was choppy with the Greenback ratcheting to an overnight high at 145.98 before retreating at the close. The overnight low recorded was 143.81.
• EUR/USD – The shared currency dipped against the US Dollar to close in New York at 1.0938 against 1.0945 on Friday. The Euro rose to an overnight high at 1.0998, just under the 1.10 resistance level, before easing to its New York close. The overnight low traded was 1.0877.
• AUD/USD – The Australian Dollar finished at 0.6710, little changed from Friday’s opening at 0.6712. Trading though was volatile with the Aussie Battler plummeting to an overnight low at 0.6640 before steadying and rallying to its close. The overnight high recorded was 0.6748.

On the Lookout:

The week ahead sees a relatively light economic calendar. Japanese markets are closed in observance of their “Coming of Age” day.

Australia releases its ANZ Bank December Job Ads (no f/c, previous was -4.6% - FX Street).

Germany kicks off Europe with its November Balance of Trade (f/c +EUR 17.9 bio from +EUR 17.8 billion – ACY Finlogix), German November Factory Orders (m/m f/c 1% from -3.7% - ACY Finlogix).

Switzerland releases its November Retail Sales (m/m f/c -0.5% from 0.2%; y/y f/c 0.7% from -0.1% - ACY Finlogix) and Swiss December Inflation Rate (y/y f/c 1.5% from 1.4% - ACY Finlogix).

The Eurozone follows with its December Economic Sentiment (f/c 94.1 from 93.8 – ACY Finlogix), Eurozone November Retail Sales (m/m f/c -0.3% from 0.1%; y/y f/c -1.5% from -1.2% - ACY Finlogix).

US Atlanta Fed President Ralph Bostic is scheduled to speak at the Atlanta Rotary Club on the 2024 economic outlook. There are no US data releases scheduled.

Trading Perspective:

The US Dollar finished mixed despite a strong Payrolls report. Trading conditions were thin ahead of the weekend which saw some volatile moves.

While there was little net movement, the trading ranges in most currencies were over 100 points. Expect a tentative start in Asia today with traders focusing on the next set of economic data releases.

Central bank rhetoric will also be a factor. Atlanta Fed President and FOMC member Bostic’s speech on the economic outlook for 2024 will be scrutinized. Bank of England Chair Andrew Bailey is also speaking this week.

• GBP/USD – The British Pound outperformed, lifted by stronger than expected economic data. Sterling settled at 1.2720 at the New York close. Look for immediate resistance today at 1.2750, followed by 1.2780 (overnight high traded was 1.2771). The next resistance level lies at 1.2810. Immediate support can be found at 1.2685, 1.2655 and 1.2625. Look for another choppy trading day in Sterling today, likely between 1.2650 and 1.2750. Prefer to sell rallies.
• USD/JPY – The Dollar dipped against the Japanese Yen to 144.55 against 144.60 previously. Look for immediate support today at 144.30 followed by 144.00 and 143.70 (overnight low traded was 143.81). Immediate resistance can be found at 144.80, 145.10 and 145.40. Look for another choppy trading day in this currency pair, likely between 144-146. Trade the range, nice and wide. (Source: Finlogix.com)

• AUD/USD – The Aussie Battler finished little-changed against the Greenback at 0.6710. Look for immediate support at 0.6680 followed by 0.6650. Immediate resistance can be found at 0.6710, 0.6740 and 0.6770. Look for more choppy trade in the Aussie Dollar, likely between 0.6650 and 0.6750. Trade the range on this currency with the preference to sell Aussie rallies.
• EUR/USD – The shared currency dipped against the Greenback to 1.0940 at the close of trade in New York, little changed from 1.0945 Friday. For today, look for immediate resistance at 1.0970 followed by 1.1000. On the downside, immediate support lies at 1.0910 followed by 1.0880 and 1.0850. Look for more choppy trade on the Euro today, likely between 1.0880 and 1.0980. Trade the range here as well, nice, and wide.

Have a good Monday and week ahead all. Happy trading.

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