The U.S. Dollar Index (DXY) surged nearly 0.6% today after U.S. nonfarm payrolls came in at 199,000 for November. In October, the figure stood at 150,000.
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Further, the unemployment rate declined to 3.7% and the average hourly earnings growth rose to 0.4% from 0.2% in October. The Street still largely expects the U.S. Fed to maintain rates at the current level at its upcoming FOMC meeting next week.
Still, the Fed may want to see evidence of continued easing in inflation for the market’s expectations of a soft landing to materialize. The U.S. 10-year bond yield has jumped by seven basis points to 4.22% and next week’s CPI numbers will be keenly watched by traders.
Traders are already anticipating rate cuts next year, and the possibility remains that the economy is headed for a recession even if the Fed does ease its tightening measures. Still, the U.S. Dollar could display strength in such a scenario if the U.S. economy remains resilient.
China is looking to strengthen its fiscal policy amid broader economic weakness, rising unemployment, and challenges in its real estate sector. Oil is now languishing at $71 per barrel and the production cuts from OPEC+ have so far failed to boost prices.
With today’s gains, DXY has almost made up for the earlier fall driven by the surge in Yen. The DXY has finally broken out of last month’s downward-sloping channel. If it sustains above the 45-day moving average, further gains could be in the offing. In the meantime, the next moves from the Fed and the ECB will possibly play a deciding role.
Source: TradingView
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