Market dynamics: USD undermined by weak jobs data
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Market dynamics: USD undermined by weak jobs data


Welcome back to our weekly market wrap on the last trading week, focused on the events that mattered most to currency and commodity markets. The US-Iran tensions eased a little last week, thus putting off the threat of escalation. This sparked the rebound that culminated with the US Dollar Index hitting a new yearly high. The US Dollar Index on Friday rallied to hit new yearly highs of about 97.60 before pulling back after the release of the US jobs data
to settle at 97.36. For the week, the index gained 0.5% despite the losses. The US non-farm payrolls data for December came in at 156,000, below expectations of 164,000 jobs. Average hourly wage growth also came short of the forecast with 2.9% growth for December versus 3.1%. This was also a significant decline from the average growth of 3.1% in November. Meanwhile, the euro rebounded against the greenback on Thursday and Friday to close the week at 1.1122. However, that was not enough to erase the weekly losses, so the pair posted a 0.4% weekly decline. According to some currency strategists, the euro is expected to rise this year as political risks shift toward the US. In the meantime, there are lower political risks in Europe, the ECB is not expected to change its current policy, there is room for some positive reforms, and capital outflows are decreasing. The EUR/USD is expected to trade at current levels and approach 1.16 by end-2020, with risks to the upside if the US Presidential election leads to a USD negative surprise, analysts say. Meanwhile, cable extended weakness after dovish comments from BoE Governor Mark Carney. The British pound fell by 0.5% on Friday to close at 1.3061. For the week, it lost 0.5%. Sterling was holding in red for the fourth straight day as expectations of BoE rate cut on 30 Jan policy meeting increased after Mark Carney’s remarks of prompt response from the central bank on signals of persisting weakness in the UK economy. Meantime, in the crypto market, Bitcoin price surged and touched the $8,400 area after the US launched a missile strike on Iran. However, when the US President Donald Trump started solving the issue through diplomacy, BTC quotes fell. The BTC price rose by 4.6% on Friday to settle at 8,176.30. For the week, it advanced by 16.9%. Analsyts predict that the price of ‘digital gold’ is likely to float in $7,500 to $8,520 range over the next month or two. Elsewhere, in commodities, oil prices posted the worst week since July as US-Iran tensions eased and investors focused on rising US inventories and other signs of ample supply. Brent crude was down 0.6% on Friday to settle at $64.98. For the week, the global benchmark lost almost 2%. Meanwhile, West Texas Intermediate crude slipped by 0.8% to settle at $59.04. For the week, it lost 3.5%. The weekly decline in both Brent and WTI crude futures have sent oil prices below levels seen before the US drone strike killed Iranian general Qassem Soleimani. However, markets are still eyeing the longer-term risks of the conflict. In the meantime, US-Iran tensions pushed Gold to highs not seen in nearly seven years. Of course, as tensions have eased, Gold is pulling back now. Gold futures rose by 0.3% to settle at 1,560.10 on Friday. For the week, the precious metal’s price advanced by 2.09%. So, where does its price go from here? There are too many influences that can push the price in either direction. For example, if tensions surrounding Soleimani’s death continue to ease, investors will continue to rotate back into stocks. On the other hand, any new violence in the Mideast is likely to push gold prices much higher.

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