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10/06/2024 - 08:04 UTCThe U.S. dollar posted a sharp recovery against other major currencies on Friday, with the dollar index (USDX) breaking above the tight range seen in the past few sessions to end the week right below the 105.0 mark. The move came following strong employment numbers from the US that cooled bets for early easing, not enough however to exclude the possibility for a September rate cut.
According to the CME Fedwatch tool, bets for the first rate hike to take place in September fell 55.7% to 44.3% while for the same scenario to occur in November, bets fell from 47.5% to 46.2.
In other news, the yen is approaching all-time lows against the dollar, even as gross domestic product data showed Japan’s economy shrank slightly less than expected in the Q1. The GDP data came just before a Bank of Japan meeting later this week, where the central bank is expected to begin its policy tightening.
Wall Street posted some losses on Friday, following record highs witnessed earlier in the week, with markets now waiting for Wednesday’s inflation data and Fed meeting for clues on whether the soft-landing hopes that drove stocks to record highs are still justified. In corporate news, GameStop fell by almost 39% in a volatile trading session as stock influencer "Roaring Kitty" kicked off his first livestream in three years. The gaming retailer had announced a potential stock offering and a drop in quarterly sales.
The key focal point for investors this week is the Fed’s monetary policy statement and the press conference that follows, which could shed some light on the central bank’s road ahead in terms of easing policies. Other key events due later this week include the BOJ monetary policy statement, U.S. core CPI data and the University of Michigan’s consumer sentiment survey.
EUR/USD tumbled sharply on Friday, receding after US Nonfarm Payrolls climbed well above forecasts and European Central Bank (ECB) President Lagarde warned that a follow-up rate cut to June’s quarter-point rate trim may not be on the cards as many investors hope.
US Nonfarm Payrolls added 272K net new jobs in May, well above the 185K forecast while th previous month saw only a slight downside revision to 165K from the initial print of 175K. US Average Hourly Earnings also outpaced expectations as wages grew at a firmer pace than investors had anticipated. The US Unemployment Rate ticked higher to 4.0%.
Despite the ECB delivering a much-sought after rate cut this week, ECB President Christine Lagarde tamped down expectations for a follow-up rate cut in July, noting that progress on inflation has been a choppy affair, and the ECB will need to see firmer progress on disinflation before committing to further rate cuts.
Gold prices declined more than 3.5% on Friday in its biggest drop since November 2020 after the U.S. jobs report and China data showing the world's top consumer held off gold purchases in May after 18 consecutive months of buying.
The jobs report led traders to once again shift their expectations of when the Fed will cut rates and by how much. The chances of a rate cut in September are now at roughly 50%, down from around 70% late on Thursday.
The Fed is not expected to make any change at its policy meeting, but the focus will be on the comments from Fed Chair Jerome Powell and changes to economic projections from the policymakers. U.S. inflation data is also due on Wednesday.
Oil prices ended the session with losses on Friday and posted a third straight weekly loss as investors weighed OPEC+ reassurances against the latest U.S. jobs data that lowered expectations that the Federal Reserve will cut interest rates soon.
Data showed U.S. jobs growth accelerated far more than expected in May, keeping the Fed on track to hold off starting to cut interest rates until September at the earliest.
Meanwhile, in China, data showed that although exports grew for a second month in May, crude oil imports fell, signalling demand concerns in the world's largest crude oil buyer.
U.S. main indexes ended lower on Friday in choppy trading after stronger-than-expected U.S. jobs data pointed to a robust economy but prompted worries the Federal Reserve may wait longer to cut interest rates than many investors had hoped.
The U.S. economy generated about 272,000 jobs in May and the unemployment rate inched up to 4%.
GameStop slumped 39% in volatile trading just as stock influencer "Roaring Kitty" kicked off his first livestream in three years. The gaming retailer had announced a potential stock offering and a drop in quarterly sales.
Investors will eye U.S. inflation data this week and the Federal Reserve's two-day policy meeting, which ends on June 12.
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