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Last week’s global market sentiment ended mostly on the upside, but the days before the weekend didn’t see much of an uptrend. On Wall Street, the Nasdaq 100, S&P 500 and Dow Jones futures rose 0.54%, 1.36% and 1.86% respectively. But at one point, the tech-heavy Nasdaq rose almost 6% before evaporating most of its progress.
A sharp reversal occurred on Friday following the report of US nonfarm payrolls for September. Not only has the country added her more than expected 288,000 jobs, but the unemployment rate has plummeted from 3.7% to 3.5%. Indeed, the labor force participation rate has softened to 62.3% from 62.4% previously. All things considered, it still points to a tight labor market.
That’s not good news for the Federal Reserve, which is trying to cut inflation at its highest level in 40 years. Earlier last week, the market was starting to price in his even one rate hike in 2023. By the end of Friday it was back on the table. Central bank balance sheets also continued to shrink, reaching their lowest level since December 2021.
Unlike the stock market, WTI crude oil prices surged 16.44% in the best week since Russia invaded Ukraine. OPEC+ has signaled production cuts in the coming months to boost prices that have fallen since May. Gold prices also rose early in the week, but like equities, most of the gains were adjusted towards the weekend.
Given the US labor market, all eyes will be on this week’s inflation report. Headline inflation is seen to fall to 8.1% y/y in September from a previous 8.3%. Unfortunately for the Fed, the core gauge is projected to rise from 6.3% to 6.5%. The latter is a more pressing issue for central banks, given the risk that prices will continue to deviate from their long-term targets.
Another strong CPI report could continue to bring volatility to financial markets and boost the US dollar. This will also encourage Japan to continue intervening in the market to contain USD/JPY. For the British pound, the UK will release employment data. China has also released her CPI report. The earnings season begins with bank reporting. What else is in store for the financial markets next week?
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US Dollar Performance Vs.currency and gold
S&P 500, Dow Jones, Nasdaq directional fate tied to CPI after NFP sale
US stocks fell Friday after US jobs data cemented the possibility of a 75 basis point FOMC rate hike. Market direction next week will depend on the US Consumer Price Index (CPI).
EUR/USD rate vulnerable to another rise in US core CPI
Data coming out in the US could continue to rock EUR/USD as the Consumer Price Index (CPI) is expected to point to sticky inflation.
British pound weekly outlook: GBP distressed on back foot ahead of next week’s key data
GBP/USD’s secular downtrend looks set to resume as key economic data points for the UK and US loom next week.
Gold price (XAU/USD) slammed by hawkish Fed and strong NFP report
Gold remains in the US rates strategy for now as US Treasury yields rise and precious metals fall after strong US jobs data.
Australian Dollar Outlook: Dovish RBA Sinks Currency
The RBA surprised the market last Tuesday by raising its cash rate target by 25 basis points to 2.60% below the expected 50 basis points and lowering AUD/USD.
Bitcoin and Ethereum predictions for next week
Bitcoin and Ethereum continue to hold YTD lows as the risky asset landscape darkens.
Canadian Dollar Forecast: US Inflation Data Toning USD/CAD
Rising oil prices should support the Canadian dollar, but the US inflation report for September could become more important for the near-term direction of USD/CAD.
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