November’s impressive NFP figure of 211k has reinforced the ever-rising optimism over the possibility of a US interest rate rise in December. In the month of November data from the United States has followed a robust trajectory, and with employment picking up the Fed has been provided with a compelling reason to raise US interest rates for the first time in almost 10 years. Sentiment towards the Dollar remains very bullish despite the post ECB selloff, and USD strength may continue to take center stage for the rest of 2015 as investors increase their bets on the Fed taking action in the December FOMC meeting.
Gold which recently bounced from near six year lows of $1046.40 has declined back down, breaking through the $1062 level as of writing. The precious metal has continuously faced punishment from Dollar strength, and today’s strong employment report, which makes a valid case for a US interest rate rise in December, may install a fresh wave of selling momentum throughout metal trading. The direction of Gold continues to be dictated by US interest rate expectations and with expectations high that the Fed will likely raise US rates, sellers may be encouraged to attack this zero yielding metal back down towards $1000.
Overall, the conclusion to take from the NFP on Friday is that the probability of a US interest rate hike in December has grown exponentially. With the long awaited FOMC press conference only a few weeks away, the USD may continue to appreciate through the global currency markets.
With all this being said, the Fed’s credibility is currently on the line. If the central bank fails to raise US rates in December even after the emphasis on the importance of US data, it may end up in the same category as the ECB which over promises but under delivers.
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