The US dollar has strengthened slightly ahead of the release of November employment data, maintaining a trading range mostly within yesterday's levels. Its fluctuations against the Japanese yen span a wide range (~JPY142.50-JPY144.50), though not as extensive as the previous day (~JPY141.70-JPY147.30). Notably, the Canadian and Australian dollars stand out as the strongest performers among G10 currencies.
Gold, after experiencing a broad range earlier in the week, has now consolidated into a narrower band, hovering around $2026-$2034.
Oil prices have stabilized, with January WTI rebounding from below $68 to approximately $71.30 before settling near $70.40 in the European morning.
Equities generally exhibit a firmer trend.
Asia Pacific
In the Asia Pacific region, the Bank of Japan is set to convene on December 18-19, but unlike the Federal Reserve and the European Central Bank, economic updates will not be provided until January. Japan revised Q3 GDP lower to -0.7% from -0.5% quarter-over-quarter (-2.9% annualized). Despite the historically undervalued yen, Japan maintains a chronic trade deficit, recording JPY 472 billion in October.
The Dollar's range against the yen today is JPY142.50-JPY144.50. With the upcoming FOMC meeting and BOJ meeting, medium- and longer-term investors are likely to adopt a cautious stance until the policy outlook becomes clearer.
The Australian dollar trades quietly within a $0.6590-$0.6620 range.
Europe
In Europe, developments in Japan and the impending US employment data weigh on market sentiment. Since the softer-than-expected preliminary CPI on November 30 (2.4%), the euro has underperformed, accompanied by a nearly 50 basis points decline in the Germany two-year yield. Ahead of the next week's ECB meeting, the swaps market assigns almost a 75% probability of a rate cut in March.
The Bank of England meeting is also on the horizon, with a 15% chance of a cut by the end of Q1 2024 according to the swaps market.
The euro is currently range-bound between $1.0775 and $1.0800, while sterling fluctuates within a little less than half-of-a-cent range under $1.26.
America
In America, an employment report today may deter market speculation of an early rate cut. While job growth is slowing, the US has created an average of 204k jobs over the past three months, down from the 254k average in the previous seven months of the year.
The greenback reached a six-day high near CAD1.3620, and a break of CAD1.3530 is required to bolster confidence in a market peak. Despite narratives associating the Canadian dollar with oil, the correlation between the exchange rate and WTI changes is modest, measuring at just under 0.25 for the past 30- and 60-days.