05/07/2024 - 07:55 UTCThe U.S. dollar posted a moderate decline on Thursday, with the dollar index (USDX) that measures the strength of the US dollar against a basket of major currencies, ending a third consecutive day in the red and hovering around three-week lows in holiday-thinned trade. The decline in the dollar was partly attributed to data showing weakness in US employment and manufacturing activity which led to growing expectations of interest rate cuts that tend to pressure the greenback. All eyes are turned towards the Non-Farm Payrolls figures.
Market expectations, as reflected by the CME FedWatch tool, point towards a September rate cut as the most probable outcome, with a likelihood of 66.5%. A November cut also holds significant weight, currently priced in at around 51.4%.
Crypto markets have been rocked this week by a steep sell-off in Bitcoin and Ethereum. The two cryptos were seen plunging by approximately 11% and 15% respectively so far this week with the move dragging down altcoins even further and causing investors anxiety to mount. The overall crypto market capitalization stands at $2.08 trillion early on Friday, from levels close to $2.8 trillion seen a month ago.
Wall Street continues to show positive momentum, with the U.S. 500 and the U.S. tech 100 hitting new record highs on a daily basis, as data pointing to a softening economy raises hopes the Federal Reserve could cut interest rates in September. For Friday, focus turns squarely towards key nonfarm payrolls data for more cues on interest rates. The upcoming data is forecast to signal a slowdown in job growth through June. This follows a string of weaker-than-anticipated labor market reports released earlier this week.
Aside from NFP numbers, some price action could also be observed upon the release of the US Average Hourly Earnings and the unemployment rate and a speech by ECB’s Lagarde at the Economic Meetings of Aix-en-Provence.
The EUR/USD pair traded in green for a third consecutive session on Thursday as Friday’s economic data docket looms large ahead. European Retail Sales and the latest round of US Nonfarm Payrolls (NFP) jobs data could see a significant amount of chart churn.
US markets will be returning to the fold after taking Thursday off for the US Independence Day holiday.
German Factory Orders missed the mark on Thursday, declining -1.6% MoM in May versus the previous -0.2%.
US NFP figures are expected to tick down to 190K in June, down from the previous month’s 272K. Markets will also be on the lookout for steep revisions to previous releases, while June’s US Unemployment rate is expected to hold steady at 4.0% MoM.
Gold prices ended the session with minor losses on Thursday amid thin liquidity conditions during the American session, as US traders are off their desks in observance of Independence Day. Recent economic data from the US augmented expectations that the Fed might begin to ease policy sooner than expected, yet policymakers remain vigilant and would like to see the disinflation process evolve further.
Bullion rallied more than 1% on Wednesday on softer-than-expected jobs reports, led by last week’s Initial Jobless Claims and ADP data showing that private hiring deteriorated in June compared with May. Traders' focus shifts to Friday’s Nonfarm Payrolls (NFP) report.
Oil prices rose on Thursday, holding after data the previous day showed a decline in U.S. inventories.
Those gains followed a larger than expected decline in U.S. crude stocks. The U.S. Energy Information Administration (EIA) reported a 12.2 million draw in inventories. Analysts polled by Reuters had expected a draw of 680,000 barrels.
Moreover, weaker economic data could hasten interest rate cuts by the U.S. Federal Reserve, analysts said, which could be supportive for oil markets.
Furthermore, On Thursday, Reuters reported that Russia's oil producers Rosneft and Lukoil will sharply cut oil exports from the Black Sea port of Novorossiisk in July, according to two sources familiar with a loading plan.
U.S. stock index futures were relatively unchanged during the holiday-thinned trade on Thursday evening, as attention shifted towards the forthcoming release of crucial nonfarm payrolls data for further insights on interest rates.
While the markets were closed for the Independence Day holiday, Wall Street indexes were at record highs attained earlier this week. This rise was attributed to numerous soft economic indicators, which increased speculation that the Federal Reserve might initiate interest rate cuts by September.
It is anticipated that Wall Street will maintain a subdued demeanour leading up to the release of the critical nonfarm payrolls data scheduled for Friday. The data is projected to reveal a moderation in the job market during June, following multiple labor market reports this week that fell below expectations.
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