Investors have been alarmed by recent sharp falls in U.S. treasury yields, with an inversion of the yield curve signaling a sharp economic slowdown or even a recession down the road.
Their immediate focus was on November U.S. non-farm payrolls, unemployment and wage data due to be released later on Friday for clues to how the world’s top economy is faring.
Dollar investors were given more reason to be cautious after the Wall Street Journal reported Fed officials are considering whether to strike a wait-and-see attitude after a likely rate increase at their meeting in December.
The dollar index .DXY, which measures the greenback against a basket of six major peers, was virtually flat at 96.802. The index shed 0.3 percent during the previous session, closing at one-week low and down 0.9 percent from a 17-month peak hit on Nov. 12.
The benchmark U.S. 10-year Treasury yield US10YT=RR was last at 2.896 percent after dipping overnight to its lowest level since late August.
Interest rate futures implied traders see no more than one rate increase from the Fed in 2019, compared with previous expectations for possibly two rate hikes, according to CME Group’s FedWatch program.
On Friday, the dollar was steady against the euro EUR= at $1.1378. Against the Japanese yen JPY=, it tacked on 0.1 percent to 112.79 yen.
• China’s yuan will breach the 7 per dollar rate within the next six months, according to about 60 percent of FX strategists polled by Reuters, who also said authorities would continue to exert control over the currency in 2019.
Having weakened over 5 percent this year, the yuan hit a 2-1/2 month high of 6.8308 on Tuesday after Washington and Beijing agreed last weekend to a90-day ceasefire in a trade war which has rattled financial markets for months now.
But uncertainty around any resolution to the trade conflict before that deadline expires has already increased.
Data from the Statistics Office showed industrial output fell by 0.5 percent, confounding a Reuters forecast for an increase of 0.3 percent.
• Bank of Japan Governor Haruhiko Kuroda said he saw no problems emerging from the central bank’s purchases of exchange-traded funds (ETF), shrugging off criticism its growing presence is distorting the stock market.
With inflation distant from the BOJ’s 2 percent target, it was premature to consider slowing or ending the bank’s purchases of ETFs - or trust funds investing in stocks, Kuroda said.
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Non-farm payrolls are expected to rise by 205,000 in November, down from the prior month's exceptional 250,000. The unemployment rate is predicted to remain at 3.7% and annual average hourly earnings to have increased 3 % last month as in October.
• The Fed has begun to scale back the expectation for next year’s rate increases after this month’s assumed 0.25%. The FOMC Projection Materials that will be issued after the December 19th meeting will detail any changes in outlook.
The labor market has been a major success for US economic and rate policy over the past two years. That will need to continue to keep the Fed on even a reduced rate increase policy in 2019 and beyond.
• Markets also face a test from U.S. payrolls data later in the session amid speculation the economy was heading for a tough patch after years of solid growth.
Federal Reserve Chairman Jerome Powell emphasized the strength of the labor market in remarks made late Thursday.
Economists polled by Reuters forecast jobs rose by 200,000 in November after surging 250,000 in October.
• French President Emmanuel Macron will speak early next week on the “yellow vest” movement as France braces for another wave of violent protests on Saturday over living costs, National Assembly speaker Richard Ferrand told Reuters.
Ferrand, a Macron close ally, confirmed earlier media reports.
The “yellow vest” movement, which started last month in protest against rising fuel prices, spread over the whole country. Protesters devastated downtown Paris during the past weekends.
• Iran appears to be the main obstacle for an OPEC oil output deal on Friday as the group’s leader Saudi Arabia has yet to agree exemptions for sanctions-hit Tehran, two OPEC sources said.
The Organization of the Petroleum Exporting Countries resumes discussions on Friday in Vienna before heading into a meeting with non-OPEC oil producers led by Russia.
On Thursday, OPEC failed to agree concrete parameters for a deal to restrict output.
• Oil prices fell on Friday, pulled down by OPEC’s move to delay a final decision on output cuts as its awaits support from heavyweight supplier Russia, which is reported to not want to reduce its output by more than 150,000 barrels per day (bpd).
International Brent crude oil futures LCOc1 fell below $60 per barrel early in the session, trading at $59.40 per barrel at 0704 GMT, down 66 cents, or 1.1percent from their last close.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $50.97 per barrel, down 52 cents, or 1 percent.
Russia wants to cut its oil output by a maximum of 150,000 bpd for the first three months of 2019, RIA news agency cited a source as saying on Friday.
Reference: Reuters, CNBC
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