Financial markets kicked off the week on a subdued note, as investors opted to play it safe ahead of crucial economic data releases and central bank meetings. Monday’s highlights include the Sentix Investor Confidence Index for Europe and the US Wholesale Inventories report for October. With major developments lined up, market participants appear to be holding back from large position changes.

US Dollar Regains Momentum

The US Dollar Index (DXY), which had posted losses for three consecutive days, rebounded on Friday, closing in positive territory. The recovery came on the back of an unexpectedly strong Nonfarm Payrolls (NFP) report for November.

According to the US Bureau of Labor Statistics (BLS), payrolls surged by 227,000, significantly above the market expectation of 200,000 and the revised October figure of 36,000. Despite this impressive job growth, the Unemployment Rate ticked up slightly to 4.2% from 4.1%. Wage inflation, as reflected in Average Hourly Earnings, held steady at an annual rate of 4%, beating the forecast of 3.9%.

Early Monday, the USD Index clung to modest gains above 106.00, while the benchmark 10-year US Treasury yield hovered just below 4.15%. Investors are now looking ahead to Wednesday, when the BLS will release the much-anticipated Consumer Price Index (CPI) figures for November.

China: Deflationary Pressures Persist

In Asia, data from China revealed a steeper-than-expected decline in the Consumer Price Index (CPI) for November, with a monthly drop of 0.6% compared to forecasts for a 0.4% decrease. This adds to concerns about deflationary trends in the world’s second-largest economy. On Tuesday, market participants will closely watch China’s Trade Balance data for further insights into its economic trajectory.

Currency Market Roundup

• AUD/USD: The Australian Dollar faced heavy selling pressure on Friday, dropping nearly 1% to its weakest level since August, below 0.6400. The Reserve Bank of Australia (RBA) is set to announce its monetary policy decision on Tuesday, which could influence the pair’s direction.
• USD/JPY: Japan reported an annualized GDP growth of 1.2% in Q3, exceeding expectations of 0.9%. However, the USD/JPY pair showed little reaction, trading slightly higher above 150.00.
• EUR/USD: After reaching a three-week high above 1.0600 on Friday, the Euro reversed its gains, closing lower. The pair continues to slide and is trading near 1.0550 early Monday. Traders are awaiting the European Central Bank’s (ECB) final policy meeting of the year later this week.
• GBP/USD: The British Pound snapped a three-day winning streak on Friday, pressured by the stronger US Dollar. The pair remains stable around 1.2750 as the new week begins.

Commodities: Gold Stays Range-Bound

Gold prices have struggled to find a clear direction, with XAU/USD maintaining a sideways trajectory. The precious metal is trading just below $2,650 early Monday in the European session, as traders remain cautious ahead of key US data.

Looking Ahead
This week promises a series of pivotal events that could shake up the markets. Investors will focus on inflation reports, central bank policy decisions, and key economic indicators to gauge the global economic outlook. With the Federal Reserve, ECB, and RBA meetings on the horizon, market volatility is likely to pick up as the week progresses. Stay tuned for updates and analysis as the action unfolds.