Weak U.S. employment data weakened the dollar, driving up the euro and pound.

The Dollar Index Plummets Affected by Weak Employment Data

On December 5th, the U.S. released employment data that fell short of expectations, leading to a widespread decline in the dollar index. The data showed that the number of initial jobless claims reached 224,000 last week, higher than the expected 215,000, and the number of layoffs in November rose to 57,700. These figures indicate a gradual cooling in the job market, heightening market concerns about an economic slowdown. The dollar index fell 0.57% on the day, closing at 105.711, showing signs of weakness.

The Euro Rebounds, Supported by Stabilizing French Debt

On the evening of the 5th, French President Macron announced the appointment of a new prime minister and ruled out the possibility of resignation, stabilizing market sentiment. French government bond prices stabilized, narrowing the yield gap with German 10-year bonds, pushing the euro higher. One euro rose to 1.0587 against the dollar, significantly higher than the previous day's 1.0514.

Scotiabank analysts point out that the stabilization of French debt provides moderate support for the euro, and the expected risk sentiment in the market is somewhat alleviated.

Pound and Non-U.S. Currencies Also Boosted

The weakening dollar helped the pound rise, with one pound reaching 1.2757 against the dollar, significantly stronger than the previous 1.2700. Meanwhile, the dollar weakened across all major currencies, including the yen, Swiss franc, and Canadian dollar. For example, one dollar was worth 150.02 yen, down from the previous 150.44; against the Swiss franc, it fell to 0.8781 from the previous 0.8841.

Dollar Outlook Dim, Market Expectations Cautious

Athanasios Vamvakidis, the head of foreign exchange strategy at Bank of America, stated that market pricing for U.S. inflation pressures remains pessimistic, and the dollar's strength may wane in early 2024. Meanwhile, Chen Kaifeng, chief economist at Huisheng Financial Management Company, predicts that the dollar's trajectory in 2025 may fluctuate, making sustained appreciation unlikely.

Outlook: Global Currency Markets May Continue to Fluctuate

The dollar's weakness due to soft employment data shows a tired state, while major global currencies are distinctly affected by economic data and policy expectations. Going forward, inflation dynamics, economic recovery, and central bank policy directions will be crucial in determining currency market volatility. Investors need to closely monitor data changes and potential risks to navigate the uncertainties in the global currency markets.

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.

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