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The U.S. dollar fell broadly in the second-half of last week after hitting a 13-1/2 year high on Wednesday. The dollar index closed the week lower following consistent gains in the last three weeks. The gauge that measures the greenback against a half-dozen rivals lost 0.28% to 100.68 on Friday, contributing to a weekly loss of roughly 0.8% as Friday’s jobs results were considered to be mixed.
Although the jobless rate dropped to its lowest level since August 2007 at 4.6%, the labor force contracted by 226,000, sending the participation rate to 61.7 from 62.8 percent, the lowest since June. Additionally, wage growth declined 0.1% on a monthly basis, which is somewhat bullish for longer-term treasuries and negative for the dollar.
The Fed will almost certainly raise interest rates later this month but the chance of an early 2017 follow-up hike may have faded due to the subdued nonfarm payrolls report. Fed fund futures indicate a 100% chance of a hike at this mid-December meeting. However, the fact that the odds of another quarter-point move remains below 50% until June 2017 shows that investors expect a hike followed by a long pause.
In the week ahead, there are no major U.S. economic reports scheduled but the ISM non-manufacturing number. The Institute for Supply Management is scheduled to release its November’s result for the U.S. service sector activity on Monday. The index is expected to rise to 55.4 from October’s 54.8.
Besides, three Federal Reserve officials including Chicago Fed President William Dudley and St. Louis Fed head James Bullard are due to speak. Their remarks will be closely watched ahead of the upcoming Fed meeting on December 13-14th.
Nonetheless, what will dominate the economic calendar next week are central banks’ meetings. The ECB is to hold its final monetary policy meeting of 2016 on Thursday. No policy change is expected but the press conference with President Mario Draghi following the rate decision will be closely watched for clues over the ECB’s bond purchasing program which expires in March of next year.
The Bank of Canada is expected to hold rates steady at its meeting on Wednesday despite having said that the bank was actively considering cutting for the third time in two years in October. Data on Friday which showed the economy added 10,700 jobs in November and the jobless rate fell to 6.8%, indicated improving labour market.
The Canadian dollar gained ground for the second week against the greenback as OPEC ministers finally agreed to trim its output by million barrels per day. The deal is still contingent on the participation of non-OPEC nations like Russia, with analysts hoping for a production cut by 600,000 barrels a day.
Like the BOC and the ECB, the RBA is also anticipated to keep interest rates on hold at record lows of 1.5% at its meeting on Tuesday. Wednesday’s data on third quarter growth will follow with rate of growth being expected to slow slightly at 0.3% in the three months to September, after expanding by 0.5% during the second quarter.