USD: Gains as a safe haven amid Middle East unrest and robust economic figures – Societe Generale

Market Focus Shifts to Safe-Haven Assets Amid Middle East Tensions

According to analysts at Societe Generale, recent macroeconomic indicators have taken a backseat as concerns over the Middle East intensify. With no signs of easing tensions, investors are expected to gravitate toward traditional safe-haven currencies such as the US Dollar and Swiss Franc as the weekend approaches.

Dominance of Safe-Haven Demand and US Jobs Data

Analysts note that, given the ongoing uncertainty in the Middle East, market participants are likely to prioritize safety, favoring the dollar and Swiss franc to shield themselves from potential escalation and fluctuating energy prices.

Recent US labor market data has consistently exceeded expectations, increasing the likelihood of another robust Non-Farm Payrolls (NFP) report. The so-called "whisper number" has risen to 65,000 following strong results from ADP, two positive ISM employment readings, and a decline in weekly jobless claims.

In the current environment, strong economic data does not necessarily translate into optimism for risk assets or non-dollar currencies. Recent movements in short-term yields have been driven by shifts in oil and natural gas prices, but there is speculation that tomorrow's NFP release and the outlook for Federal Reserve rate cuts could unsettle the bond market.

Analysts suggest that a jobs gain in the range of 30,000 to 70,000 is unlikely to significantly impact markets. Instead, the closing levels of oil and natural gas prices at week’s end are expected to play a more decisive role in shaping market direction.

Last month, a notable 2.5 standard deviation surprise in the NFP figure compared to consensus forecasts provided broad support for the US dollar against both G10 and emerging market currencies.

(This report was produced with the assistance of artificial intelligence and reviewed by editorial staff.)