08/07/2024 - 07:33 UTCThe U.S. dollar continues to move lower against most major currencies on Friday, with the dollar index (USDX) ending the week 0.97% lower to hit one-month lows, as data from the US indicate weakness in US employment led to growing expectations of interest rate cuts, diminishing the appeal of the dollar and Treasuries.
Market expectations, as reflected by the CME FedWatch tool, point towards a September rate cut as the most probable outcome, with a likelihood of 69%. A November cut also holds significant weight, currently priced in at around 51%.
Elsewhere, asian currencies remained pressured by worries about a possible trade war between China and the EU, however, some currencies saw gains due to the dollar's recent weakness, fueled by hopes of interest rate cuts in the US.
Gold rallied above the $2,300 level this week as a string of downbeat labor market reports, culminating in the softer-than-anticipated nonfarm payrolls data, heightened hopes for an interest rate cut by the Federal Reserve.
Crypto markets plunged for yet another week, with Bitcoin being one of the main drivers, as the number one cryptocurrency fell back to levels last seen in early May. The sell-off came after a dormant Mt. Gox wallet was seen active for the first time in a month, hinting potential asset sales. The German government and Federal Criminal Police Office also fueled the sell-off by transferring a combined $125 million to crypto exchanges, raising concerns of market dumping.
Wall Street continues to show positive momentum, with the US 500 closing at record highs once again, on bets that Federal Reserve rate rate cuts may soon be on the horizon after the June monthly jobs report pointing to cooling in the labor market.
Traders could look for more cues on U.S. interest rates from a testimony by Fed Chairman Jerome Powell and key inflation data later this week.
The EUR/USD rose on Friday after a mixed US Nonfarm Payrolls (NFP) print on Friday before settling on the high side.
Investors have ignored the better-than-expected Non-Farm Payrolls (NFP) report and are instead paying attention to increasing unemployment, slowing wage growth, and downward revisions to previous job reports.
As a result, they are increasing their bets that the Federal Reserve will be pushed to cut interest rates sooner rather than later.
Friday's US Non-Farm Payrolls (NFP) exceeded median market forecasts by adding 206K net new jobs in June.
Market participants will be looking out for an appearance from Federal Reserve (Fed) Chairman Jerome Powell on Tuesday, followed by final inflation figures from both the EU and the US on Thursday. This Friday will close out next week with German Retail Sales, as well as US Producer Price Index (PPI) inflation and University of Michigan Consumer Sentiment Index survey results.
Gold prices continued to rise on Friday, reaching their highest point in over a month as a result of significant U.S. jobs data indicating a weakening labour market. This has led to expectations of a Federal Reserve interest rate cut in September.
The data revealed that non-farm payrolls in the U.S. increased by 206,000 jobs in June, slightly exceeding the estimated 190,000 new jobs anticipated by economists surveyed by Reuters.
After this data release, U.S. interest-rate futures prices still indicate a high level of market confidence in a potential September rate cut, with the implied probability remaining steady at around 72%.
Despite a lower settlement on Friday, oil prices achieved a fourth consecutive week of gains. This was driven by signs of increased summer energy demand and ongoing supply disruptions due to adverse weather conditions. Expectations of further tightening in oil markets over the coming months also contributed to the positive trend. However, trading volumes remained subdued due to the U.S. market holiday on Thursday.
Data revealing a significant decrease in U.S. oil inventories supported bets on heightened demand, particularly with fuel retailers preparing for holiday travel. Furthermore, it is anticipated that there have been considerable reductions in crude inventories this week.
In terms of supply, the number of oil rigs remained steady at 479 compared to the previous week.
U.S. main indexes experienced gains on Friday, with the US 500 achieving record highs amid expectations of potential interest rate cuts by the Federal Reserve following the release of the June monthly jobs report, which indicated a slowdown in the labour market.
Treasury yields were impacted by the report, as the economy added 206,000 jobs last month. In addition, the unemployment rate rose to 4.1% from 4.0% in May, along with a deceleration in average hourly wage growth, further supporting the likelihood of a rate cut in September.
Meta Platforms Inc spearheaded the surge in the technology sector, with notable gains seen in the stock prices of Alphabet, Microsoft Corporation, and Apple.
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