- The American Dollar has difficulty finding its feet, down 1.39%, as shown by the US Dollar Index.
- Speculations that the Fed would tighten in smaller increases mounted as the labor market gave signs of easing.
- The US 2s-10s yield curve inversion, the deepest since the 1980s, and US recession fear increased.
Gold price continues to extend its rally in the October US Nonfarm Payrolls report aftermath, up by more than 2.50%, in growing speculations that an uptick in the rate of unemployment might deter the Federal Reserve from aggressive tightening. However, Federal Reserve Chairman Jerome Powell said the Federal Funds rate (FFR) peak would be higher than September’s projections. Therefore, the XAUUSD is trading at around $1672 amidst a volatile trading session.
The US Unemployment Rate is approaching to 4%, a headwind for the US Dollar
Following the release of the Nonfarm Payrolls, the US Dollar falls further. The US economy added 261K jobs, above estimates of 200K, but what probably rocked the boat was that the Unemployment Rate increased by 3.7% from 3.5% in the previous month, signaling that the labor market is easing amid the most aggressive Federal Reserve tightening cycle. Also, Jerome Powell’s words that the Fed might begin to slow its pace of increases “as soon as the next meeting” is a headwind for the greenback.
The US 2s-10s yield curve inverted the most in 40 years as recession drums got louder
In the meantime, US Treasury bond yields, particularly the 10-year benchmark note rate, almost parked at 4.156%, unchanged. However, what’s grabbing the attention is the inversion of the 2s-10s yield curve, which is used as a leading indicator of upcoming recessions. At the time of typing, the spread between the US 2s and 10s is -0.534%, and it’s the highest inversion of the curve since the 1980s, as the US 2-year bond yield sits at 4.694%.
Of late, some Fed speakers are crossing newswires, led by the Boston Fed President Susan Collins. She said that she supports 75 bps increases if needed, added that inflation is too high and that the Fed “must restore price stability. According to Collins, the Fed’s monetary policy “is now in restrictive territory.” Later, Richmond’s Fed President Thomas Barkin said that the jobs report was about as he expected, though he added that the labor market remains tight and that there’s some work left to do.
Gold Key Technical Levels