Daily Market Review - 1/13/2014

XAU/USD

Gold Futures

Rallied sharply to end at a one month high on Friday, after disappointing U.S. nonfarm payrolls data reduced concerns over a further reduction in U.S. monetary stimulus.

The disappointed data cooled expectations that the Fed would cut its stimulus program again this month. The central bank cited a stronger labor market in its decision to taper its asset purchase program by USD10 billion in December to USD75 billion-a-month.

Market Overview

U.S December jobs report that came out Friday revealed a weaker-than-expected hiring pace for the last month of 2013. Despite the disappointing numbers, the markets closed mostly higher in volatile session.

The Labor Department said Friday that the U.S. economy added 74,000 jobs, while the unemployment rate dropped to 6.7% from a prior reading of 7%. This was the smallest increase since January 2011 and far below market expectations for an additional 196,000 jobs.

In the Fed latest meeting last month, he stated that he plans to begin reducing the pace of monthly bond purchases this month by $10 billion a month to $75 billion, indicating in part that policy makers believe the economy can handle fewer purchases. His decision came mainly on back of the strong Job numbers that came in recent month. Despite Firday’s surprise, the Fed is not expected to change his decision.

The Fed as well as other FOMC members are expected to appear several times in the upcoming week and are expected to share their views on the latest Job report as well as on their monetary policy.

At the start of the trading week today, Asian exchanges were mostly higher despite Fridays report while Japan’s exchanges remained closed due to a public holiday.

China's benchmark Shanghai Composite index hit a new five-month low as investors reacted to a new regulatory tightening while the Yuan hit a fresh record high against the dollar.

In the week ahead, investors will closely monitor U.S. data on retail sales, inflation and consumer sentiment, as well as speeches by two Federal Reserve officials on Tuesday.

The European economic calendar is pretty light in the week with only The Eurozone Industrial productions as well as its Inflation report are expected.

Attention is also expected to turn to corporate profits as earnings season gathers steam this week, with some of the U.S bank giants likes of JP Morgan, Goldman Sachs, Intel and General Electric due to report.