Recommended by Daniel Dubrovsky
Get Your Free Equities Forecast
Global market sentiment mostly ended on an upbeat this past week, but a lot of the upside progress was given up the day before the weekend. On Wall Street, Nasdaq 100, S&P 500 and Dow Jones futures gained 0.54%, 1.36% and 1.86%, respectively. But, at one point, the tech-heavy Nasdaq was up almost 6 percent before evaporating the bulk of its progress.
The sharp reversal occurred on Friday in the wake of September’s US non-farm payrolls report. Not only did the country add more jobs than expected at 288k, but the unemployment rate sharply dropped to 3.5% from 3.7%. Granted, the labor force participation rate softened to 62.3% from 62.4% prior. All things considered, it pointed to a still-tight labor market.
This is not good news for the Federal Reserve, which is trying to bring down the highest inflation in 40 years. Early last week, the markets were starting to price out even 1 rate hike in 2023. By the end of Friday, it was back on the table. The central bank’s balance sheet also continued shrinking, touching its lowest since December 2021.
Diverging from stock markets, WTI crude oil prices surged 16.44% in the best week since Russia invaded Ukraine. OPEC+ signaled output cuts in the coming months to try and bolster prices that have been falling since May. Gold prices also ended higher for the week, but like stocks, most gains were trimmed heading into the weekend.
Given the labor market in the US, all eyes now turn to this week’s inflation report. Headline inflation is seen falling to 8.1% y/y in September from 8.3% prior. Unfortunately for the Fed, the core gauge is predicted to come in at 6.5%, up from 6.3%. The latter is a more pressing issue for the central bank as prices risk continuing to de-anchor from the long-run objective.
Another solid CPI report would likely continue bringing volatility into financial markets, pushing up the US Dollar. This would likely also push Japan to continue intervening in markets to contain USD/JPY. For the British Pound, the UK will release employment data. China also releases its CPI report. The earnings season starts with banks reporting. What else is in store for financial markets in the week ahead?
Recommended by Daniel Dubrovsky
Get Your Free Top Trading Opportunities Forecast
US DOLLAR PERFORMANCE VS. CURRENCIES AND GOLD
US equity indexes sold off on Friday after the US jobs report solidified the chances for a 75-basis point FOMC rate hike. The market’s direction in the week ahead hinges on the US consumer price index (CPI).
Data prints coming out the US may continue to sway EUR/USD as the Consumer Price Index (CPI) is anticipated to show sticky inflation.
The longer-term downtrend looks to be resuming for GBP/USD as key UK and U.S. economic data points lie ahead next week.
Gold remains a US interest rate play for now with rising US Treasury yields sending the precious metal lower after a robust US Jobs Report.
The RBA surprised markets last Tuesday when they raised the cash rate target by 25 basis points to 2.60%, less than the 50 basis points expected, sending the AUD/USD lower.
Trade Smarter – Sign up for the DailyFX Newsletter
Receive timely and compelling market commentary from the DailyFX team
Subscribe to Newsletter
A bounce in the early-portion of the week was aggressively-faded on Friday and focus now shifts to the next CPI report as a hawkish Fed continually reminds markets that they’re not finished yet.
Is the US Dollar correction over? The stage is set and its decision time for the bulls in the days ahead. The levels that matter on the DXY weekly technical chart.
US crude is on track for five straight days of advances after OPEC+ decided to cut output from in November. Aggressive rise highlights $93 and $100 as key levels
Gold has managed to recoup some losses following the break below major support last month. Silver continues to be in its well-established three-month range. What is the outlook and what are the key levels to watch?
Canadian Dollar Technical Forecast: Technicals Hint at Renewed Downside Pressure for the Loonie
Can a hawkish BoC and rising oil prices help keep the Canadian dollar on the front foot?
The British Pound (GBP) has continued to suffer after a strong decline that drove prices to a fresh all-time low at 1.035