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06/09/2024 - 06:43 UTCThe dollar declined for a second consecutive session against most of its major peers on Thursday with the dollar index losing another 0.20%, reestablishing the steep downward trend that had begun in July. This followed the ADP private payrolls report that missed expectations in August, raising concerns about the economy's strength. The report showed that private payrolls increased by only 99,000 jobs in August, down from 111,000 in July. This was the weakest monthly figure since January 2021. Economists had predicted an increase of 144,000 jobs. Meanwhile, initial jobless claims fell by 5,000 to 227,000 in the week ending August 31.
According to the CME's FedWatch tool, the market is currently pricing in a 59% chance of a 0.25% interest rate reduction by the Federal Reserve in September. While a larger cut of 0.5% is seen as less likely at 41%, there is still a significant probability of further easing in November, with odds currently standing at 49.5%.
Fresh concerns over the health of the U.S. economy weighed on equity markets, sending all three main stock indices on another decline on Thursday, following weak data from the labour market and ahead of the August nonfarm payrolls report.
Verizon's stock dipped slightly after announcing a $20 billion acquisition of Frontier Communications. The telecom giant hopes this deal will strengthen its market position. Meanwhile, Tesla shares surged as the company revealed plans to expand its advanced driver assistance technology to Europe and China early next year.
Within the energy sector, the two primary benchmarks, West Texas Intermediate and Brent crude ended Thursday’s session almost unchanged following declines of over 5% so far this week. The market appears cautious ahead of the U.S. employment report, despite a sharp decline in U.S. crude oil inventories and a delay in production increases by OPEC+ that could potentially provide some strong support to prices. Significant downward pressure on oil prices was exerted by news concerning a potential resolution of the ongoing dispute in Libya.
Friday's trading session is likely to be centered around the U.S. non-farm payrolls and unemployment rate, as their release could have a substantial impact on market sentiment. Analysts are forecasting a 164,000 increase in the number of employed people in August, compared to the 114,000 increase observed in July.
The EUR/USD pair extended gains for a second consecutive session on Thursday, rising above the 1.1100 mark as traders scaled back their USD positions in anticipation of Friday's key US Nonfarm Payrolls (NFP) report.
European economic figures, meanwhile, provided limited support for the euro as July’s EU Retail Sales data fell short of forecasts
In the US, payroll processor ADP reported the addition of 99,000 jobs in August, a notable drop from July’s revised figure of 111,000 and far below the forecast of 145,000. This represents the lowest job growth reported by ADP since early 2021, raising fresh concerns about a potential US recession and driving renewed risk aversion among investors.
Gold prices surged to near one-week highs on Thursday, supported by a weaker U.S. dollar and declining bond yields, as signs of a softening labor market fueled speculation of a substantial rate cut from the Federal Reserve later this month.
In August, U.S. private employers added the fewest number of jobs in over three-and-a-half years, signaling a potential slowdown in the labor market. This followed earlier data that showed a sharp drop in U.S. job openings for July, intensifying concerns about economic weakness. All eyes are now on Friday’s closely-watched U.S. Nonfarm Payrolls (NFP) report.
Oil prices remained at 14-month lows on Thursday, pressured by concerns over weakening demand in the U.S. and China and the potential for increased supply from Libya. These factors offset the impact of a significant drop in U.S. crude inventories and a delay in production increases by OPEC+.
The U.S. Energy Information Administration (EIA) reported that energy firms withdrew 6.9 million barrels of crude from storage in the week ending August 30, a much larger draw than the 1 million barrels anticipated by analysts. The American Petroleum Institute (API) had similarly reported a draw of 7.4 million barrels earlier in the week.
U.S. main indexes closed lower on Thursday as concerns about the economy resurfaced following mixed employment data, with investors turning cautious ahead of the August nonfarm payrolls report due on Friday.
Economic figures, released just ahead of Friday’s nonfarm payrolls report, have increased speculation about a more aggressive Federal Reserve rate cut.
Tesla Inc gained over 4% after the electric vehicle manufacturer announced plans to roll out its advanced driver assistance technology in Europe and China by the first quarter of 2025.
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