Financial markets remain jittery on Thursday following a volatile Wednesday, as traders await key US employment data after hawkish comments from Fed Chair Jerome Powell and mixed US economic signals. Adding to the uncertainty are mixed reactions to the Organization for Economic Co-operation and Development’s (OECD) growth forecasts, ongoing Middle East tensions, and trade war concerns.
That said, the OECD raised global growth forecasts for 2025 while keeping the current year’s growth estimations unchanged. The OECD also lifted growth predictions for the US for 2024 and 2025 but reduced economic growth estimations for the EU, Japan and the UK for 2024. The international agency also cited the risk of protectionism for the global economy.
Elsewhere, political drama in South Korea and France continues to challenge the market’s optimism but the escalating hopes of a Gaza ceasefire favored the risk-on mood.
Fed Chairman Jerome Powell adopted a more hawkish tone, citing stronger growth and higher inflation as reasons for a cautious approach to finding a neutral rate. Similarly, the Fed's Beige Book highlighted economic and business optimism for 2025. However, weaker US ISM Services PMI and ADP Employment data, alongside cautious optimism in the market, challenged the US Dollar's recovery.
Amid these plays, the US Dollar Index (DXY) pares the weekly gains amid dicey markets, allowing other major currencies and Antipodeans to edge higher even if commodities struggle to remain positive.
Upbeat Eurozone data supported the EURUSD pair’s recovery, despite political uncertainty in France after the Prime Minister lost a no-confidence vote. ECB President Christine Lagarde acknowledged medium-term economic uncertainty, short-term growth weakness, and a gradual decline in inflation but resisted pushing for significant rate cuts.
Bank of England (BoE) Governor Andrew Bailey adopted a dovish tone on Tuesday, advocating for gradual rate cuts and emphasizing the need for the BoE to "lean in a bit harder" to keep the disinflation process on track. Despite this, the US Dollar’s weakness, combined with an upbeat UK Services PMI for November, supported a positive daily close for the GBPUSD pair.
USDJPY remains slightly pressured around 150.00, following its biggest daily jump in three weeks, as US Treasury bond yields stay under pressure ahead of this week's US jobs report. The pair’s recovery is also challenged by concerns over the Bank of Japan's (BoJ) rate hikes and potential Japanese intervention to defend the Yen (JPY).
Antipodean currencies remain weak, with AUDUSD facing heavy losses due to concerns about China, sluggish Aussie growth, and dovish expectations for the Reserve Bank of Australia (RBA). Meanwhile, NZDUSD ends a three-day losing streak but is still on track for a weekly loss, and USDCAD struggles to hold gains, despite posting its first daily loss in four days.
Gold posts mild gains during a three-day recovery after a weekly fall. In doing so, the precious metal struggles to benefit from the market’s anxiety ahead of the top-tier US data, as well as fears of global economic and geopolitical tensions, as dovish Fed bets dwindle.
Crude oil dropped despite market optimism and a higher-than-expected draw in weekly inventories, as mixed reactions to OPEC+'s delay in its supply increase decision ahead of today’s key meeting weighed on prices. Additionally, downbeat crack spreads and concerns over reduced energy demand due to China’s issues and potential economic turmoil in major consumers outside the US added further pressure.
Cryptocurrencies surged the previous day after US President Donald Trump nominated pro-crypto Paul Atkins to replace Gary Gensler as SEC Chair. This sparked industry optimism, helping Bitcoin (BTCUSD) reach a new all-time high above 100K and driving Ethereum (ETHUSD) to its biggest daily jump in a week, before a slight pullback from a six-month high.
Looking ahead, German Factory Orders, Eurozone Retail Sales, and US Jobless Claims, along with the OPEC+ meeting, will keep markets active. However, a cautious mood ahead of Friday’s US and Canadian employment data, along with the US UoM Consumer Sentiment Index and Inflation Expectations, could limit volatility.
The US Dollar may remain under pressure due to weak US data and skepticism over Fed Chair Powell’s hawkish stance. This could allow EURUSD and GBPUSD to recover weekly losses, while USDJPY may lack clear direction and stay stronger for the week. Antipodean currencies are likely to suffer from concerns over China and dovish central bank outlooks.
Crude oil may see a recovery if OPEC+ confirms a delay in the supply increase, while gold could remain under pressure due to mixed sentiment and US Dollar strength.
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