Dollar extends uneven recovery, Yields rebound

During the Asian session, Japan will release jobs data, and New Zealand consumer confidence data is due. Later in the Asian session, the Chinese Caixin Manufacturing PMI is due. Switzerland will report Q3 GDP, and the final Manufacturing PMIs are also due. Canada will release its employment report, and in the US, the ISM Manufacturing PMI is scheduled. Fed Chair Powell will participate in two events.

Here is what you need to know on Friday, December 1:

Data from the US released on Thursday showed that consumer inflation, measured by the Core Personal Consumption Expenditure Price Index, dropped from 3.7% to 3.5% in October compared to the previous year, in line with expectations. Initial Jobless Claims were set at 218,000, and Continuing Claims jumped to 1.927 million, the highest level since November 2021. On Friday, data to be released includes the ISM Manufacturing PMI. Fed Chair Powell will participate in two events, and the market will also hear from Fed’s Goolsbee.

Government bond yields rebounded across the board, weakening the Japanese Yen. The 10-year Treasury yield rose from 4.25% to 4.36%, while German yields climbed from 2.40% to 2.46%.

Equity prices on Wall Street had a mixed performance, with the Nasdaq falling while the Dow Jones was headed towards its highest daily close since January 2022. Data from the US, with inflation slowing and a softer labor market, suggests that the Fed won’t be raising interest rates, which investors welcomed.

China’s NBS PMI came in below expectations, not helping risk sentiment. On Friday, the Caixin Manufacturing PMI is due.

The US Dollar Index (DXY) had its best day in weeks, extending its recovery from monthly lows. The DXY rose above 103.50. At this point, the move appears to be corrective in nature. However, US fundamentals could prevent the Index from hitting fresh lows over the next weeks.

The Euro continued to underperform, with another reading indicating a further slowing of inflation in the Eurozone. EUR/USD fell below 1.0900, EUR/GBP approached 0.8600, and EUR/CHF tumbled to one-month lows below 0.9500. The final reading of the Manufacturing PMI is due on Friday, with no revision expected; however, sometimes there are surprises.

USD/CHF bottomed at 0.8680 and then rebounded sharply, rising above 0.8750, offering signs that a short-term bottom is in place. The Swiss Franc was among the top performers on Thursday, for the second day in a row. On Friday, Switzerland’s Q3 growth data is due.

USD/JPY rebounded strongly despite the deceleration in US consumer inflation. The rebound was supported by higher US Treasury yields and more dovish comments from Bank of Japan officials. The pair found support at the 100-day Simple Moving Average (SMA) at 146.90 and climbed to 148.50. While the risks are biased towards the downside, it’s important to note that occasional sharp rebounds cannot be ruled out. After mixed data on Thursday, more reports from Japan are due on Friday, including the Unemployment Rate, Capital Spending, and the final Manufacturing PMI.

GBP/USD corrected to the downside, having its worst day in a month, falling towards 1.2600. While above 1.2430, the bias remains to the upside.

USD/CAD continues to move sideways above the 100 and 200-day Simple Moving Averages. The Canadian employment report is due on Friday, with a positive net change in employment of 15,000 expected, and the Unemployment Rate seen edging a tick higher from 5.7% to 5.8%.

AUD/USD finished little changed around 0.6600 after bottoming at 0.6570, the lowest level in three days. The short-term bias is to the downside, but the uptrend remains in place. The final Judo Bank Manufacturing PMI will be released on Friday.

NZD/USD stabilized around 0.6150, and further consolidation ahead seems likely. The ANZ – Roy Morgan Consumer Confidence report for November is due on Friday.

Gold dropped after rising for five consecutive days and pulled back below $2,040. Considering the movement in the bond market, the correction was limited. Silver did not follow gold, as XAG/USD rose, closing above $25.00, the strongest level since May.