U.S. equities were stronger on Friday, the S&P up 0.9% and closing at another record high. Bonds sold off as well, with US10Y yields rising 6bps to 0.97%, while oil finished up 1.4%.
Curiously enough, the risk-on tone was underpinned by a downside miss on US payrolls for November; deteriorating labor market conditions could pile additional pressure on Democrats and Republicans to deal with a new stimulus package before year-end.
Much of the US dollar crash and burn has been focused on the US end of the stick. Tanking cross-asset risk premiums have all but curbed the market's demand for safe haven US dollar, and that lack of demand is now merging with the market's policy outlook via the dovish duo of Yellen and Powell. But this week Europe takes center stage as all ears and eyes will be trained on the ECB.
The selling pressure that drove the dollar lower vs. the Euro last week abated into the close, with the greenback paring its loss due to a combination of Brexit uncertainty and pre-ECB uncertainty as to whether or not Europe's central bank will push back again Euro strength. As such, and failing a US stimulus announcement, one should expect the Euro to range trade ahead of what’s an important ECB meeting.
But this should be taken in context, as other parts of the Forex universe continued to sell the dollar – particularly in Asia FX. The Canadian dollar also rose to its strongest level in more than two years on Friday, after Canada and US headline jobs data went in opposite directions when better-than-expected domestic job numbers contrasted with a disappointing US labor market report.
Prices strengthen following the conclusion of the OPEC meeting. An agreed outcome was the key, and that’s what we got, although it was far from the expected scenario.
Gold remains supported by a combination of stimulus and weaker US dollar expectations.
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With equity markets rising to fresh record highs in the United States and Europe, risk appetite is rising again