In November, the average weekly hours in the United States exceeded forecasts, hitting 34.3 hours compared to the predicted 34.2 hours. This development coincided with a slight rise in Nonfarm Payrolls, which increased by 64,000 in November after a preceding decline of 105,000 in October.
US retail sales were virtually unchanged in October, amounting to $732.6 billion, falling short of market expectations. The earlier revised increase of 0.1% from 0.3% for September suggests a stagnant retail environment in contrast to forecasts.
PMI Numbers Indicate Slowdown
The US S&P Global Manufacturing PMI fell to 51.8, and the Services PMI dropped to 52.9 in December. These figures come following mixed employment data, and they reflect a slowdown in private sector growth.
Market reactions saw the GBP/USD surge past 1.3400, driven by upbeat PMI data as the US Dollar weakened. Meanwhile, gold prices recovered above $4,300, gaining from renewed dollar weakness amid the latest jobs report, showing unemployment rising to 4.6% in November.
We are seeing clear signs of a slowing US economy as we close out the year. The latest data from December shows manufacturing and services are losing momentum, while job figures from November were mixed and retail sales have flattened. This pattern points toward economic weakness carrying over into the new year.
The US Dollar is falling as a result of this weak data, particularly with the unemployment rate now at 4.6%. Markets are increasingly betting that the Federal Reserve will have to pause its tightening cycle or even begin cutting rates in 2026, a situation reminiscent of the policy pivot we saw back in late 2023. This expectation is putting sustained downward pressure on the dollar.
Strategies for Traders
For currency traders, this suggests positioning for further dollar weakness. We see potential in buying call options on pairs like the EUR/USD and GBP/USD, which are already showing strong upward momentum. This strategy allows for capitalizing on the trend while managing downside risk.
On the equity side, the slowing economy poses a risk to corporate earnings. The VIX, a measure of market fear, has already climbed to over 20, up from an average of 17 in the third quarter. We believe buying put options on major indices like the S&P 500 is a sensible hedge against a potential market downturn in the coming weeks.
Gold is benefiting significantly from the weak dollar and general market uncertainty. Its strong move above $4,300 an ounce indicates a flight to safety is well underway. We think this trend has more room to run, making long call options on gold futures or related ETFs an attractive position.
