Crude Oil recovers from five-month low amid mixed concerns

Global market dwindle early Thursday as the US Dollar ignores softer Treasury bond yields and downbeat US employment clues ahead of more US statistics. In doing so, the greenback braces for next week’s FOMC, mainly due to the hawkish comments from US Treasury Secretary Janet Yellen and the recently firming clues about US soft landing.

It’s worth noting, however, that the firmer US Dollar fails to weigh on the Gold and Crude prices on upbeat China data and calls for a Fed policy pivot.

That said, EURUSD and GBPUSD lack clear directions amid economic pessimism surrounding the Eurozone and the UK while USDCAD struggles to cheer firmer Oil prices on Bank of Canada’s (BOC) dovish halt. Further, USDJPY traces downbeat Treasury bond yields but the policymakers’ defense of the Bank of Japan’s (BoJ) easy-money policy.

Elsewhere, BTCUSD and ETHUSD regain upside momentum after reversing from the yearly high as markets expect further hardships for the US Dollar and more inflow of funds to the crypto markets, especially amid the looming spot ETF approvals.

Following are the latest moves of the key assets:

• Brent oil licks its wound at five-month low, mildly bid at $74.85 by the press time.
• Gold price remains defensive after bouncing off weekly low the previous day, up 0.10% near $2,028 at the latest.
• USD Index prints four-day uptrend at 104.20 as we write, printing minor gains at the highest levels in three weeks.
• Wall Street closed with minor losses while Asia-Pacific stocks edged lower.
• BTCUSD and ETHUSD pick-up bids to reverse the previous day’s retreat from multi-month highs to around $44,000 and $2,255 by the press time.

Firmer US Dollar fails to weigh on commodities…

The US Dollar Index (DXY) stays defensive at the three-week high after rising in the last three consecutive days as mixed data, mostly downbeat joins a lack of clarity about the Fed’s next move and the US economic transition.

Talking about the data, the US Automatic Data Processing INC. (ADP) released the monthly release of ADP Employment Change for November, the early signal for Friday’s Nonfarm Payrolls (NFP). The private payroll data suggested a slower addition to the workforce for the said month, 103K versus 130K expected and 106K prior. Additional employment data from the US data suggested that the Nonfarm Productivity for the third quarter (Q3) improved to 5.2% from 4.7% initial forecast, versus 4.9% expected, whereas the Unit Labor Costs for the said period dropped to -1.2% compared to -0.9% market forecasts and -0.8% first estimation.

Also favoring the US Dollar could be the US Trade Balance which showed an increase in the nation’s trade deficit to $64.3 billion for October versus $64.2 expected and $61.5 prior. Further, Reuters’ poll of 102 economists said that a slight majority see the Fed waiting until at least July to cut rates, which in turn prod the US Dollar sellers. On the same line is the Atlanta Fed’s GDPNow tracker which showed the US Q4 growth as 1.3% from 1.2% the previous week.

Moving on, US Treasury Secretary Janet Yellen pushed back the Fed rate cut expectations while urging traders to interpret economic data carefully. “Fed wants to create financial conditions consistent with bringing down inflation,” added US Treasury Secretary Yellen. That said, China warned the UK on announcing new sanctions on individuals and groups "supporting and funding Putin's war machine", by stating that the actions, "will be met with a firm response". Additionally, the Group of Seven Nations (G7) also reiterated their pledge to support Ukraine against the Russian invasion and bolstered the geopolitical fears, which in turn favored the market’s rush toward the yellow metal.

On a different page, an increased draw in the US weekly crude oil inventories and Saudi Arabia’s defense of the OPEC+ output cut policies joined the dovish Fed concerns and hopes of China stimulus to allow the Crude oil bears to take a breather at the lowest level since late June.

Elsewhere, European Central Bank (ECB) policymaker Peter Kazimir pushed back the latest expectations suggesting the central bank’s rate cuts in early 2024 while saying, “Market bets for a Q1 rate cut are 'science fiction'.”

Furthermore, the Bank of England (BoE) released its bi-annual Financial Stability Report (FSR) the previous day and mentioned that the full impact of higher rates will take time to come through. The same suggested more pain for the British economy which is already witnessing downbeat data. Additionally, BoE Governor Andrew Bailey crossed wires on Wednesday while saying that the inflation outlook is uncertain and rates likely to need to remain around current levels while also adding, “We remain vigilant to financial stability risks that might arise.”

• Strong buy: USDCAD
• Strong sell: ETHUSD, GBPUSD, Gold
• Buy: USD Index, Nasdaq, USDJPY
• Sell: DAX, FTSE 100, BTCUSD, AUDUSD, EURUSD

EU/US data to keep traders busy…

Looking ahead, German Industrial Production and Eurozone Q3 GDP will entertain the intraday traders ahead of the US Weekly Jobless Claims and Challenger Job Cuts for November. While the European data are likely to keep the Euro pressured, the US Dollar might witness a pullback should the scheduled employment clues appear diming. The same could help the buyers of commodities and Antipodeans to extend the latest recoveries.

May the trading luck be with you!