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🔍 “Hawkish Cut” in September? 💸 US Labor Market in Focus 💼
The data-heavy, holiday-shortened week appears volatile after a weak US manufacturing activity report on Tuesday triggered economic growth concerns. The Volatility Index (VIX), spiked above 20 and is up over 43% this week. Now, the US labor market takes center stage, with all eyes on Friday's nonfarm payrolls (NFP) report for August, which will be pivotal in determining the size of the Fed’s rate cut. As the Fed shifts focus from taming inflation to addressing job market risks, the question is whether the September rate cut will be “hawkish.” Markets currently price in a 59% chance of a 25 bps cut and a 41% chance of a 50 bps cut in September. The July JOLTs Job Openings data is scheduled for today, while Thursday brings the weekly jobless claims numbers and the ADP employment report. Globally, the Bank of Canada (BoC) is expected to cut rates by 25 basis points today.
Forex
What Next for EUR/USD?💶
The US Dollar is under pressure, with the Dollar Index (DXY) trading around 101.6. EUR/USD is trading above 1.105 and has risen nearly 300 pips (2.9%) since the beginning of July. A lower-than-expected NFP could strengthen the case for a 50 bps cut in September, bringing the 1.115 level well in sight for EUR/USD.
Indices
NFP Pivotal for US Stock Market
September did not start well for the US stock market. On Tuesday, the S&P 500, Nasdaq 100, and Dow Jones 30 marked their biggest declines since early August, driven by a slump in megacaps. All eyes are now on the August jobs report for further market direction. So far this year, the US 500 and NAS 100 have surged 16.5% and 12%, respectively, and are trading above 5,520 points and 18,800 points. Strong demand for AI, solid consumer confidence, and growth in corporate earnings appear longer-term catalysts.
*As of 09/03/2024 close, S&P 500 weekly movers
Metals
NFP: A Fresh Catalyst for Gold? 🔥
Gold prices are up 20.6% this year, trading above the $2,480/oz level amid Dollar weakness and looming Fed rate cuts. A disappointing NFP report could bolster the case for a 50 bps rate reduction in September, bringing the psychological $2,500/oz level well within sight for non-interest-paying gold. Meanwhile, solid central bank demand remains a key support.
See you next week! 👋