Strong NFP To Keep Fed on Hold This Week

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USD Softer Despite Strong NFP

The US dollar has been a little softer over the European morning on Monday, retracing the gains posted on Friday on the back of a strong NFP. The headline NFP figure came in a 266k jobs vs 181k expected.

With the unemployment rate also falling to 3.5% from the prior and expected 3.6%, the data was very strong and should see the Fed keep rates unchanged at its rate-setting meeting this week. USD index trades 97.59 last, capped by the 97.69 level for now.

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EUR Rises on Weak USD

EURUSD has been a little firmer so far today, benefiting from weakness in the US dollar. EURUSD trades 1.1066 last, straddling the middle of the range between the 1.1024 level and 1.1166. The main focus this week is on the ECB meeting on Thursday which will be the first headed by new ECB president Christine Lagarde. While we expect no further easing at this point, traders are anticipating dovish forward guidance from the new ECB chief.

GBP Higher on Elections Polls

GBPUSD remains well supported on Monday, with price still trading above the 1.3033 level. The main focus for GBP traders this week is the UK elections on Thursday.

Current polls continue to show the Conservative party in the lead. If the Conservative party does win, the focus will be back on the PM’s Brexit deal which should help keep sentiment positive towards GBP.

Trade Deal Uncertainty Weighing on Risk Sentiment

Risk assets have had a subdued start to the week with the SPX500 hovering around 3144.28 last. While the market remains optimistic around the prospect of a US-China trade deal, there is still a risk that if a deal is not done by December 15th, the US will activate a new round of trade tariffs which would weigh heavily on risk sentiment.

JPY & Gold Firmer

Safe havens have started the week on a firmer footing with both JPY and gold higher against the US dollar as trade deal uncertainty sees increase safe-haven flows. USDJPY trades 108.47 last, having fallen back below the 108.84 level.

XAUUSD trades 1463.19 last, recovering off last week’s lows. However, in light of last week’s sell-off, gold looks vulnerable to another push lower.

Crude Backs Away From Resistance

Oil has been softer at the start of the week. Late on Friday, crude pushed up to just shy of testing the 60 level resistance, though has since reversed.

News that OPEC and allied non-OPEC members have agreed to deepen the current production cuts from 1.2 million barrels per day to 1.7 million barrels per day should keep crude supported in the near term.

CAD Lower Following Data Miss

USDCAD has had a quiet start to the week with price consolidating near the top of last week’s rally around 1.3258. Despite the strength in USD on the back of a strong US jobs number, the rally in crude has helped boost CAD, offsetting some of the upside pressure in the pair.

Last week, the Canadian unemployment rate jumped from 5.5% to 5.9% which has increased expectations of a BOC rate cut in the near future.

Aussie Lower on Monday

AUDUSD has been lower over the morning session on Monday with price pulling away from the .6850 level to trade .6824 last. The pause in upside momentum for risk assets is being reflected in Aussie price action so far today. US-China trade talks remain the key driver here and if a deal doesn’t look like it will be done ahead of December 15th, we could see deeper weakness in AUD.

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