Today at 5:30 Dubai time US jobs data will be released, and the markets are awaiting how the real reading will be compared to the expected and compared to the previous reading.
Expectations indicate that the US economy added about 200 thousand jobs during the month of November 2022 compared to 261 thousand jobs for the previous reading, and if the expectations are true, this means:
- Recruitment pace considered the weakest since December 2020
- It is also the second consecutive decline in employment data.
- This means that employment continues to fall below a support level that has been extended for more than two years.
The jobs report will be crucial in determining the expectations of interest rate hikes and final interest rate expectations ahead of the next FOMC meeting.
Hence, if the employment report is stronger than expected, the stock and gold market may fall and the dollar may rise due to fears that the Federal Reserve will be tighter with interest rate hikes, while a reading within or below expected may increase hopes that the Fed will deal with loose interest rates and this may drag the dollar is further lower and pushes the stock and gold markets higher.
The minutes of the last Federal Reserve meeting, which investors focused on, showed the consensus of Fed officials on the need to start at a slower pace to raise interest rates, and as a result, stock markets rose and the dollar fell, but at the same time, we have to pay attention to some of the details mentioned in the minutes, which are as follows:
- The Fed chairman stressed that a rate cut isn't going to happen anytime soon and that it's something he doesn't want to do anytime soon.
- It was noted that the final interest rate, which is necessary to reach the inflation target of 2%, may be higher than previously expected.
- It was also noted that there are no clear signs of abating inflation.
Dollar Index Technically:
The attached chart shows us that the dollar index fell by more than 8% in the last two months after it recorded high levels at the end of last September that were close to levels 115 to abandon an uptrend which has been moving since the middle of last year.
It is currently settling near important support levels defined in the area near 104.6 and this is what increases the importance of employment data for today, which will make us watch with interest how the dollar will deal with those levels.
On the other hand, the important resistance that may restore the positivity of the dollar index is limited to levels near 107, which there is no alternative to exceeding them for the return of positive price momentum.
Therefore, when reading the expectations of price movement, we must balance between the opportunity to start reducing the pace of raising interest rates and between the extent of their continuity and the final interest ceiling, and in general we expect that the release of these data will be accompanied by fluctuations in the financial markets, given that employment and inflation data depend on the Fed to read the economic scene before any change in interest rates.
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