In the week ahead: U.S. Core CPI, BOC & ECB Rate Statements, U.K. GDP

The EUR/USD broke above its three-week trading range on Friday, bolstered by the market’s initial reaction to the US Nonfarm Payrolls report. However, the pair’s gains were short-lived as the rally reversed quickly ending the session 0.22% lower.

US employment figures exceeded expectations in November, with payrolls increasing by 227,000 compared to the forecasted 200,000. Wage growth held steady at 4%, defying predictions of a slight slowdown to 3.9%. Despite the stronger job growth, the unemployment rate ticked up to 4.2% from 4.1%, sustaining hopes for a December rate cut by the Federal Reserve.

Despite the strong US labor data, the euro edged higher, supported by broader market dynamics. However, ongoing political turmoil in France remains a key factor to watch, as it could dampen any significant rallies in the common currency.

Gold prices posted minor losses on Friday following the release of the US Nonfarm Payrolls (NFP) report for November.  The robust labor market figures have bolstered expectations for another Federal Reserve (Fed) rate cut in December.  The implications of the labor market data for the Fed’s policy trajectory are significant.

Lower interest rates tend to benefit gold prices by reducing the opportunity cost of holding the non-yielding asset. However, the recent uptick in job additions has temporarily weighed on the yellow metal as markets reassess the Fed’s next moves.

Oil prices declined by over 1% on Friday, capping a week of losses as concerns about a supply surplus in 2024 overshadowed an OPEC+ decision to delay output hikes and extend production cuts through 2026.

The downward pressure on prices was partly driven by an increase in oil and gas rig activity in the United States, signaling rising output from the world’s largest crude producer.  A slowdown in global oil demand, particularly from top importer China, has been a persistent drag on prices.

While OPEC+ production cuts provide a temporary floor for oil prices, the combination of weak demand, rising U.S. production, and persistent supply surpluses continue to weigh on the market.

The US Tech 100 and US 500 surged to record closing highs on Friday, buoyed by strong corporate forecasts from companies like Lululemon Athletica and optimistic U.S. jobs data that fueled speculation of a December Federal Reserve interest rate cut. Meanwhile, the US 30 ended lower, weighed down by a sharp decline in UnitedHealth Group shares.

The U.S. Labor Department reported a surge in job growth for November, though the unemployment rate ticked up to 4.2%, signaling a potentially easing labor market.

Rate futures now indicate a 90% probability of a 25-basis-point rate cut at the Fed’s December 17–18 policy meeting, up from 72% earlier this week.