FX market outlook

FX market outlook

Aussie steady after weak jobs data; greenback in focus ahead of Yellen testimony.

The Australian dollar was steady despite a disappointing employment report that showed a smaller-than-expected gain in jobs in October. The US dollar was down against the yen in today’s Asian session. The greenback also gave up gains versus the euro. Investors took the opportunity for some profit-taking ahead of a key testimony by Federal Reserve Chair Janet Yellen later today.

The dollar edged down against the yen to 108.54 yen, moving off a five-month high of 109.74 reached yesterday. The huge week-long rally since Trump’s election win seems to have slowed down and markets are turning their focus on the Fed and whether they will raise interest rates in December’s meeting.

Several Fed speakers this week have indicated their support for a rate hike next month but all eyes will be on Fed Chair Janet Yellen today as she will be testifying about the economic outlook before the Joint Economic Committee in Washington DC.

The euro ticked up to an Asian session high of $1.0713 after dipping yesterday to $1.0665 for the first time in a year.

The Australian dollar was steady in today’s Asian session after falling to a two-month low of $0.7459 yesterday. Some volatility was seen after the Australian jobs report today which briefly took the AUDUSD pair to a session high of $0.7500 before steadying around $0.7475.

Data showed that the Australian economy added 9,800 jobs in October, missing expectations for a gain of 16,000. Adding to the disappointing news was the steep downward revision to September’s numbers, to show a loss of 29,000 jobs rather than the initial estimate of 9,800 lost. The unemployment rate in Australia remain unchanged at 5.6%.

Gold traded in a tight range around $1225 in the Asian session today. The precious metal is sensitive to US interest rates and has come under pressure recently on growing expectations that the Fed will raise interest rates at its December policy meeting.

Oil prices slipped after a strong two-day rally after a report on Wednesday showed a build in US crude inventories. Brent crude slipped from yesterday’s high of $47.52 a barrel to trade around $46.45 in Asia, while WTI crude fell from yesterday’s high of $46.37 to $45.40 in today’s Asian session.  Meanwhile, the direction of oil prices depends a lot on the outcome of a meeting by OPEC in Vienna at the end of this month and whether a deal will be reached to curb oil production.

Looking to the rest of the day, important economic data releases include UK retail sales, final Eurozone inflation figures and US jobless claims data. Focus will also be on Fed speakers which include William Dudley, Lael Brainard and Charles Evans but the highlight of the day will be Fed Chair Janet Yellen’s testimony.