US stocks strengthened today following labour market data, which exceeded expectations, suggesting that the economy is bound to remain resilient in the coming quarter. The unemployment rate remained unchanged at 3.7% YoY in December compared to expectations of an uptick to 3.8% YoY. At the same time, factory orders bounced back from -3.6% YoY to 2.6% YoY in November, confirming the persistent strength of consumer demand. The dollar index fell to the 102 level as the markets continued to price in the first interest rate cuts in March. The forward swaps are pricing in a 75% chance of a 25bps cut at the Fed’s first spring meeting this year. The 10-year US Treasury yield fell to 3.97%. Elsewhere, the first estimate of the eurozone CPI released today pointed to a rise in the annual rate of inflation from 2.4% YoY in November to 2.9% YoY in the last month of 2023. Still, the increase came as no surprise. In the latest ECB statement, the policymakers warned of a possible uptick in headline inflation given fluctuating energy prices. The core CPI softened in December to 3.4% YoY from 3.6% YoY in the previous month, confirming that the prolonged period of elevated interest rates continues to have an impact on underlying price pressures. The euro strengthened against the dollar, with the USDEUR pair trading at 0.91.
Base metals started the day on the back foot, continuing the downward trend that began earlier this week. The recent minutes from the Fed confirmed the policymakers’ plan to keep interest rates higher for longer, helping to offset the dovish sentiment that took hold of the markets by the end of last year. Moreover, a strong rise in the dollar weighed on the morning session. However, later in the day, US data pointed to a jump in payrolls last month, helping to reiterate the Fed’s rhetoric. While the case for multiple interest rate cuts is still present, the scale of the easing of the monetary policy softened, prompting risky assets, as well as the base metals complex, to reverse earlier losses. As a result, most of the metals have remained broadly unchanged today.
The softer dollar pushed precious metal prices higher. For a moment, gold jumped close to $2,065/oz before setting below $2,059.25/oz while silver appreciated to $23.36/oz. Tensions in the Middle East exacerbated fears of possible supply problems, leading oil to trade higher today. WTI and Brent appreciated to $73.77/bl and $78.82/bl, respectively.
All price data is from 05.01.2024 as of 17:30
