General Market Analysis – 13/01/25

US Markets Hit After Strong Jobs Report – Dow Down 1.6%

US stock markets took a big hit on Friday after a stellar jobs report indicated that the US economy is still in great shape. However, inflation concerns increased with the data release as Treasury yields and the dollar pushed higher, while stocks dropped due to diminishing expectations of a rate cut. The Dow and the Nasdaq both fell 1.63% by the close, with the S&P close behind, taking a 1.54% loss.

US yields rose sharply, with the 2-year Treasury adding 11.5 basis points to close at 4.379%, and the benchmark 10-year yield gaining 6.9 basis points to reach 4.759%. The dollar strengthened against most major currencies following the data, with the DXY index up 0.4% to 109.68.

Oil prices also saw significant movement as the US announced fresh sanctions against Russia, pushing Brent crude up 3.69% to $79.76 and WTI up 3.59% to $76.57. Gold prices initially dipped on the data release but rebounded, closing the day up 0.68% at $2,686.24 per ounce.

Dollar Hits 2-Year High After Strong Jobs Data

The dollar strengthened further on Friday after a strong US jobs report hit the market. The US economy created over a quarter of a million net new jobs last month, well above expectations, driving the dollar higher. This result has significantly reduced expectations of an interest rate cut from the Federal Reserve in the coming months, giving the green light for dollar bulls to continue buying the greenback against most major currencies.

Recently, we’ve seen strong breaks in major currency pairs, with most appearing set to push into new ranges for the year. One standout on Friday was USD/JPY, which appreciated after the data before sharply retracing the day’s gains and more before the close. Traders remain aware that the Bank of Japan is unlikely to tolerate swift downside moves in the yen, which could explain Friday’s volatility and suggests the pair may see more fluctuations in the coming weeks and months.

Quiet Day to Start the Trading Week

Asian markets are set to begin the week on the back foot after a stellar US jobs report heightened inflation concerns and led to a tough trading day for US stocks last Friday. Japanese markets are closed for a holiday today, potentially reducing liquidity during early trading.

With little scheduled on the macroeconomic event calendar, traders expect risk-off sentiment to dominate markets. Both European and US sessions also lack significant Tier 1 data releases, likely resulting in a continuation of recent trends. However, markets will keep a close watch on newswires for fresh geopolitical developments as the day progresses.

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