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Waiting for the NFP - What to expect?

The NFP employment data from the US is expected today at 14:30 CET. What can we expect now after the less than positive data over the course of the week?

Poor guidance from the PMIs

Looking back at last week's data, it casts considerable doubt on the forecast 202,000 new jobs in the Non-Farm Payrolls (NFP). On Monday, the purchasing managers' index (PMI) for the manufacturing sector came in slightly better than expected. However, at 48.4 points, it remains below the important 50-point mark that separates growth from decline. The fact that the PMI for prices fell from 54.8 points to 50.3 points can also be seen as a bad sign, which may completely cancel out the positive effect of the first slight increase.

The PMI for services, which make up the most important part of the US economy, looks worse. Although it is still above the 50-point mark, it has fallen significantly from 56 points in the previous month to 52.1 points now. Analysts had expected only a slight fall to 55.5 points. The PMI for employment in the service sector has also fallen from 53 points to 51.5 points.

ADP and unemployment figures are rather pessimistic

The ADP employment change figures provided an initial impression of the possible outcome of today's NFP figures. On the one hand, they were 20,000 jobs below forecasts at 146,000. But the previous month's result was also revised downwards by 49,000 jobs. These figures are also reflected, at least in part, in the data on initial applications for unemployment benefits. At 224,000, the number of new applications was 9,000 higher than the expected 215,000. The previous month had to be revised slightly upwards by 2,000 applications. Even though the NFP figures have often come as a surprise, the figures do not point to another surprise.

How will the markets respond to the NFP?

Recently, the markets have often reacted rather atypically to macroeconomic data. The gold price in particular has partially decoupled itself from the development of the US dollar. It currently looks like it is in a holding pattern until the NFP figures, fluctuating between 2634 $ and 2644 $. If the figures do indeed disappoint today, this would be a strong sign that the US Federal Reserve will cut interest rates again at its meeting next week, which usually has a positive effect on the gold price. In this case, it is likely that the gold price will resume its upward trend.

For the US dollar, on the other hand, this would be a negative signal. Having already weakened as a result of the rather poor data this week, this trend could pick up speed if the figures are disappointing. In this case, the EUR/USD exchange rate could move back towards 1.07.

The prospect of a further rate cut would be positive news for indices and equities. It therefore cannot be ruled out that the indices will once again aim for new record highs.

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Bitcoin

Bitcoin climbs above 100,000 US Dollars

On Thursday night, Bitcoin exceeded the USD 100,000 mark for the first time. The reason probably comes from an announcement by future US President Trump.

Possible New SEC Chairman drives the Bitcoin Price

After consolidating just below the USD 100,000 mark since mid-November, the price of Bitcoin broke through this mark for the first time on the night of 12 December, reaching a new record high of USD 104,000. There are many reasons for this. The most important, however, is likely to be Donald Trump's decision to name crypto proponent Paul Atkins as his preferred candidate for the chairmanship of the US Securities and Exchange Commission (SEC). Should this actually be realised, ETFs for further cryptocurrencies could be approved as a result. So far, these are limited to Bitcoin and Ethereum. It remains to be seen whether a broad offering will attract additional capital or whether the capital accumulated to date will be further dispersed. Overall, however, it would be positive for the broader acceptance of cryptocurrencies.

The planned establishment of a position in the White House to deal specifically with policy relating to digital currencies was also received positively by the crypto community. There is also the possibility that the USA could create a state reserve in Bitcoin under Trump. So far, it is unclear what funds will be used to create this reserve. Some speculate that it will consist of Bitcoin confiscated from criminals, which could have a rather minor impact on the price. However, there are also proposals to buy a total of 1 million Bitcoins over a period of several years. This would be almost 5% of the limited amount of 21 million Bitcoin. Such a move could have a more significant impact on the price of Bitcoin. And not only after the purchase is completed, but already after the announcement.

What's next for Bitcoin?

After reaching a new record high of USD 104,000, the price initially fell by almost USD 3,000. This was probably primarily due to profit-taking, although this was very limited. The price is currently hovering between USD 102,000 and USD 103,000. If it remains above the 100K mark until the upcoming weekend, this could be interpreted as a signal for further upward potential in the short term. If it falls below this mark, initial resistance in the USD 95,000 range is to be expected. However, it is likely that the price will consolidate in the current range until the next news, positive or negative, influences the further direction of the price.

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UK inflation reaches 2 percent mark

The inflation data published today in the UK shows that the 2% mark targeted by many central banks has been reached.

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Inflation in Germany and Spain declines, Indices reacts with rise

According to the data already available from five German federal states, inflation in Germany is falling significantly. The German indices react with a rise.

Prior to the publication of the inflation data for Germany at 14:00 CET, the data for five federal states were published at 10:00. These show a clear slowdown in the rise in consumer prices. Inflation in Baden-Württemberg, for example, amounted to 3.4% last month, one percentage point below the forecast.In Bavaria, the price increase of 2.8% was below the 3% mark and 0.9% lower than forecast. The data from the federal states suggests that the inflation rate for Germany as a whole will also be well below the forecast 3.5%.

The German stock indices reacted to the first data on inflation in Germany with a significant rise in some cases. The DAX is currently up by around 1.05% and the TecDAX by 1.36%. In addition to the German inflation data, the Spanish inflation data was also published in the morning. Contrary to an expected increase of 0.2%, the rise in consumer prices actually fell by 0.3% and stood at 3.2% in November. Even if falling inflation does not suggest a change in interest rate policy is imminent, it is likely that the ECB's cycle of interest rate hikes has come to an end.

In contrast, the euro initially reacted to the German inflation data with losses against the US dollar. A possible end to the European Central Bank's restrictive monetary policy would significantly reduce its current advantage over the US dollar, which is weakening due to the Fed's loosening interest rate policy. The EUR/USD currency pair is currently trading at 1.9073, down 0.15 %.

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Brussels exchange

Markets show restraint ahead of Fed meeting minutes

Tuesday begins with a cautiously positive trend. After weak data from Asia, investors are hoping for more information on the Fed's course in the evening.

From Asia, the most important Asian indices such as the Nikkei and the Hang Seng provide moderately negative to neutral guidance on Tuesday. However, this appears to have little or no influence on the European indices. Shortly after the market opened, Germany's leading index, the DAX, was virtually unchanged, as was the Euro Stoxx 50.

A certain degree of restraint is expected on the stock market today, as many investors are eagerly awaiting the minutes of the US Federal Reserve's last meeting, which will be published this evening. After the Fed left interest rates unchanged again at the last meeting, investors are hoping that the FOMC minutes will provide information on the reasons behind the decision. In conjunction with the latest data on inflation and the US economy, a clear picture could emerge as to whether the cycle of interest rate hikes in the US may have come to an end. If investors' expectations are confirmed in the evening, the momentum of the past week could return to the markets.

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