Markets remain cautious ahead of Non-Farm Payrolls later today. The publication follows yesterday’s jobless claims, which all-in-all made for promising reading. Initial jobless claims fell to 227k compared to 232k the previous week and layoffs remained low, reassuring markets that the US labour market still has some grit to it. Of course, jobless claims are merely the intro to the main event later on. This month’s NFP release is a particularly important one, given that it is arguably the last piece of the economic puzzle that could affect the Fed’s interest rate decision in a couple of weeks’ time. In an ideal world, the Federal Reserve would achieve its inflation target of 2% without tanking the labour market in the process. So far so good. Odds of a 25 basis point cut currently stand around 60% versus 40% for a 50 point cut.
The DXY drifted down to 101 yesterday as traders brace for the impact of a September rate cut. The Dollar is already down around 5% from its yearly highs, allowing other currencies to play catch-up. Gold had a solid session yesterday, finishing the day 0.85% higher to close at $2,516 an ounce. Oil on the other hand continued to flounder on Thursday, initially showing strength only to close flat on the day. Crude prices are now trading at yearly lows, with Brent Crude around $72 a barrel and WTI below $70. Transient developments in the Middle East aside, the fact remains that demand forecasts are still pretty dour.
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