The financial calendar is thin today and the market will be affected mostly by FED member’s speeches after Friday’s very important NFP report which rose 156k in December versus 204k in November. Notable improvement is the rise in average wage earnings which is at the strongest level since 2009. What this means is that if workers earn more money, then inflation is likely to rise in the future as these workers will have more money to spend on goods and services. A spike in prices (inflation) gives ground to the FED or any other Central Bank to raise interest rates which should strengthen the Dollar further. In the UK, weekend comments by the PM Theresa May, weighed on the Sterling. 5 FOMC members are scheduled to make 6 speeches this week, including Fed Chair Janet Yellen.
Currencies: The Dollar ended the week on a strong foot, after the release of the details from Friday’s NFP Report. As mentioned, the pickup in wages is an important factor why traders bought the USD after the release, as the inflationary expectations that rise from wage growth, give support to the FED raising rates in 2017 numerous times (At least 2). On the other hand, GBPUSD opened the week on a very weak note, by comments from UK PM as she emphasized in a televised interview that Brexit is about “getting the right relationship, not about keeping bits of membership.” And she noted that the right relationship is about being “have control of our borders, control of our laws” while having the “best possible deal” for trading with EU. The comments indicated that control of immigration and law prevail access to the single markets. GBPUSD dropped as low as 1.2169 today from 1.2430 highest level on Friday.
Stocks: U.S. stocks ended at record highs, fueled by optimism over Trump’s plans to stimulate the economy with lower taxes and increased infrastructure spending. Both the Nasdaq and the S&P 500 ended at record highs. European equities opened the week on a mixed start with UK +0.30%, the DAX -0.23% and CAC -0.2%.
Oil and Gold: Oil prices edged lower, thanks to a stronger dollar and growing concern whether OPEC producers would stick to an agreement to cut output. Brent crude futures were down 0.3% in early trade. Gold prices fell on Friday, retreating from the previous sessions one-month highs as the dollar strengthened against a currency basket after U.S. jobs data showed a slowdown in hiring in December but a pickup in wage growth. The price has stabilized now around $1175 per ounce