The dollar is holding on to Friday’s gains, when it reached a four-month high against the euro. The greenback’s gains came after the release of employment data that surprised to the upside, demonstrating a vitality in the US labour market that surpassed the expectations of most observers. The publication of the positive data had an immediate effect on the sentiment of investors, who now expect the tapering of the Fed’s asset purchases to start in the not-too-distant future as concerns over the state of the labour market start to fizzle-out.
The price of gold dropped to lows not seen since March during early Monday trading, following the publication of US labour data on Friday that was more positive than expected, making it more likely for the Fed to bring forward the timing of the tapering. This dynamic propelled the US dollar to new multi-month highs and penalised gold due to the inverted correlation between the two assets. This movement was significant as the precious metal broke below its bull market trendline, compounding the effect of the losses as many investors had set their closing orders at that level.
European stocks started the week without a clear direction as investors struggle to assess the global near-term outlook. While last week’s strong US jobs report has confirmed the recovery is well on its way, it also sparked concerns of a stimulus withdrawal, with tapering expected to be announced by the Fed no later than next month. Investors see positive macro numbers as both good news and bad news and fear that staying exposed to a market no longer supported by central banks may put their portfolio at risk. That said, there is a new batch of macro data to digest this week with investors paying close attention to the US Price Consumer Index release on Wednesday as well as on any speech from the Fed officials to gain more clues on the schedule of the hawkish shift.
Pierre Veyret– Technical analyst, ActivTrades
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Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.