Stocks, Oil and Gold recover but greenback slides as US House passes bill to raise $31.4 trillion debt ceiling

Chris Beauchamp IG

Stocks recovered some of their recent losses but the US dollar slid as the US debt ceiling bill was passed by the House of Representatives and is on its way to the Senate before President Joe Biden can sign it into law, says Axel Rudolph, Senior Market Analyst at online trading platform IG.

US Dollar advance stalls as Fed signals "skip"...

“Now that Democrats and Republicans have basically agreed to raise the US debt ceiling and a new bill is expected to become law before the 5 June cut-off date at which the US would default, the US dollar advance stalls. Comments by permanent voters Fed Governors Philip Jefferson and Patrick Harker in which they expressed a preference to skip a potential interest rate hike this month, led to a repricing of risk ahead of Friday's all-important Non-Farm Payrolls and average hourly earnings.”

...but US ADP data points towards Fed rate hike in June

“A much stronger ADP private payrolls report of 278,000 jobs created in May (versus 173,000 expected) and annual pay up 6.5% year-on-year, led to a sharp rise in the probability of another rate hike being seen in June. According to the CME FedWatch tool, whereas around 45% of investors expected the fed funds rate to rise to between 5.00% to 5.25% in June ahead of the ADP employment report, around 74% did so after the report with 26% vying for a rate hike to 5.25% to 5.50%. The immediate effect of this swift repricing initially pushed stock and oil prices lower before they rallied on much stronger-than-expected US month-on-month construction spending while the greenback continued to slide and the gold price remained bid.”

Author

Chris Beauchamp

EUR/USD deflates to fresh lows, targets 1.1600

The selling pressure on EUR/USD now gathers extra pace, prompting the pair to hit fresh multi-week lows in the 1.1625-1.1620 band on Friday. The continuation of the downward bias comes in response to further gains in the US Dollar as market participants continue to assess the mixed release of US Nonfarm Payrolls in December.

GBP/USD breaks below 1.3400, challenges the 200-day SMA

GBP/USD remains under heavy fire and retreats for the fourth consecutive day on Friday. Indeed, Cable suffers the strong performance of the Greenback, intensified post-mixed NFP, and trades at shouting distance from its critical 200-day SMA near 1.3380.

Gold flirts with yearly tops around $4,500

Gold keeps its positive bias on Friday, adding to Thursday’s advance and challenging yearly highs in the $4,500 region per troy ounce. The risk-off sentiment favours the yellow metal despite the firmer tone in the Greenback and rising US Treasury yields.