The USD strongly appreciated as a satisfying NFP figure of 271K greatly exceeded expectations. A sense of clarity ripples through the global markets as expectations mount that the Fed may likely hike rates in 2015. This impressive NFP figure has gone against the string of soft economic releases from the States this week, and as fears fade away about the potential slowdown in economic momentum in the US, the USD will continue to appreciate. With employment thriving in the US economy, one of the Fed’s two mandates to promote maximum sustainability has now been achieved and this provides a compelling reason for the Fed to act in 2015.
Gold which has declined for four consecutive days with prices showing little signs of recovery has plummeted further smashing through the 1100.0 support. With the prospects of a 2015 US rate hike reinforced and USD strength remaining rife in the global currency markets, this precious metal may experience additional downwards pressures. The 1100.0 support on Gold has been conquered and the next relevant support will be based at 1080.00.
Dollar strength has resulted in the EURUSD declining to the downside plummeting over 150 pips, a scenario most desirable for the European Central Bank (ECB). If USD appreciation becomes the main theme in the global currency markets, the EURUSD may continue to decline, which may ease some pressure away from the ECB. Most feel that the ECB may further QE in the December meeting, but there is the chance that it could wait for the Fed to raise rates first before proceeding with further stimulus measures in 2016.
Overall, the conclusion to take from the NFP on Friday is that the probability of a US rate hike in December has inflated considerably. Dollar strength may resonate throughout the global currency markets and positive economic data release from the States fuel the bullish sentiments market participants already have towards the USD.
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