Market Sentiment Freezes, Dollar Virtually Unchanged

Markets digest US jobless claims and Philadelphia manufacturing

The correction in US equity futures is deepening as risk sentiment remained low, while the 10-year yield at 1.88% appears to be keeping the dollar strong. It seems that the hawkish tone of the Fed has saturated the markets and they have become less sensitive lately.

The US economy is close to full employment and today’s surge in unemployment insurance claims only managed to slightly lower the dollar index, which stabilized around the 95 level ,40. The United States saw an increase of 55,000 new jobless claims to 286,000 in the week ending January 15, up from the previous period at 230,000. was the biggest weekly increase since mid-July after the Omicron variant prevented employers from retaining workers.

On another note, plant activity in Philadelphia topped the January 2022 forecast of 18.9, improving from a one-year low of 15.4 in December 2021. The optimism that Business results for growth over the next six months remain positive.

Messages from the ECB on a stronger pound sterling

The Euro remains lackluster around $1.1340, returning to Asian session levels. ECB policymakers’ rhetoric regarding recent inflation is believed to be attributed to temporary factors that should ease in 2022. Nonetheless, if elevated levels haunt the Eurozone for an extended period, the ECB will likely need to appropriate measures to support growth. That said, the ECB echoed the fact that net purchases under the PEPP program could be reduced and could end by the end of March, but balanced this, with the fact that monetary support remained a necessity, dampening expectations of a rate hike this year.

The pound is doing better against the greenback and the euro and has repaired the one and a half basis point damage over the past week against the reserve currency, forming a pull on the $1.3600 handle, after minor weakness in the greenback on rising unemployment insurance claims. EURGBP is firm around 0.8330 but maintains a negative bias.

The yen hasn’t benefited from subdued strength in the dollar, whose recent pullback from 116.40 to the dollar is hovering around 114.25 to the dollar, while gold is currently flat around $1,840. ounce – after yesterday’s rally from $1,817.

Employment plummets

Australia is doing well at the start of 2022 with its seasonally adjusted unemployment rate falling to 4.2% in December 2021 from 4.6% a month earlier, recording the lowest number since August 2008 when the blockages have been removed. More jobs were created in Australia in December, increasing employment by 64.8k to a new record high of 13.24m, beating market forecasts of a 43.3k rise. This happened even though the participation rate missed December’s estimate by a fraction, remaining unchanged from the previous month at a high of 66.1%, while monthly hours worked in jobs fell. increased by 1%.

The Aussie is climbing higher, currently at $0.7240, keeping the ascent from 0.7000 active. Although the Reserve Bank of Australia has said it is unlikely to go ahead with hikes until 2023, a stronger economy has markets now pricing in a 70% chance by May for a takeoff. Additionally, markets are expecting the RBA to update its guidance somewhat at the May meeting to acknowledge that an early hike may be on the cards, while the RBA will have to revise its QE policy at its May meeting. February.

Momentum in oil and the loonie is drying up

WTI futures consolidated around $85.55 a barrel as Canadian dollar strength came to a halt, with the dollar/loonie pair settling slightly below the C$1.2500 barrier .

At 3:00 p.m. GMT, US existing home sales are expected, while natural gas storage and crude oil inventories will follow at 3:30 p.m. and 4:00 p.m. GMT respectively.

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