- The US economy gained only 245,000 jobs in November, far below expectations.
- Weak job gains are unlikely to trigger robust stimulus.
- A squeeze on dollar shorts ahead of the weekend
It is all a matter of timing. An increase of 245,000 jobs would be considered robust in the pre-pandemic era, but when the data relates to November 2020, a figure in the upper edge of the old normal represents the end of the recovery.
The US dollar edged lower in the initial aftermath but has three reasons to bounce after suffering a downfall throughout the week.
1) Limited impact on lawmakers
One of the reasons for the dollar's downfall came from a bipartisan group of senators who laid out a $908 billion stimulus deal. Despite the across-the-aisle nature, Senate Majority Leader Mitch McConnell has remained mum on the topic and he reportedly prefers a smaller package.
Is this weakness enough to push McConnell and others to action? It may raise the chances of approving a deal worth around $1 trillion – but that is already priced in by markets. Without a bigger relief package – which may or may not come in January – the safe-haven dollar could rise.
2) Vaccine bounce
Another unrelated risk-on factor came from the UK's approval of the Pfizer/BioNTech coronavirus vaccine. However, Dr. Anthony Fauci criticized the rapid process and the firm will likely produce fewer doses. While Fauci later apologized, these immunization concerns may also add to pressure on the safe-haven greenback. This is the chance for profit-taking
3) Fed firmly on hold
Jerome Powell, Chairman of the Federal Reserve, testified on Capitol Hill and refrained from offering more stimulus in the upcoming meeting. He has good reasons – waiting for the vaccine, for the new administration, and for seeing the full impact of the virus on the economy. While job growth is weak, it is insufficient to trigger more monetary stimulus – not enough.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD clings to recovery gains near 1.0850 ahead of Fedspeak
EUR/USD trades in positive territory near 1.0850 on Friday following a four-day slide. China's stimulus optimism and a broad US Dollar correction help the pair retrace the dovish ECB decision-induced decline. All eyes remain on the Fedspeak.
GBP/USD pares UK data-led gains at around 1.3050
GBP/USD is trading at around 1.3050 in the second half of the day on Friday, supported by upbeat UK Retail Sales data and a pullback seen in the US Dollar. Later in the day, comments from Federal Reserve officials will be scrutinized by market participants.
Gold at new record peaks above $2,700 on increased prospects of global easing
Gold (XAU/USD) establishes a foothold above the $2,700 psychological level on Friday after piercing through above this level on the previous day, setting yet another fresh all-time high. Growing prospects of a globally low interest rate environment boost the yellow metal.
Crypto ETF adoption should pick up pace despite slow start, analysts say
Big institutional investors are still wary of allocating funds in Bitcoin spot ETFs, delaying adoption by traditional investors. Demand is expected to increase in the mid-term once institutions open the gates to the crypto asset class.
Canada debates whether to supersize rate cuts
A fourth consecutive Bank of Canada rate cut is expected, but the market senses it will accelerate the move towards neutral policy rates with a 50bp step change. Inflation is finally below target and unemployment is trending higher, but the economy is still growing.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.