Markets Drift Ahead of Non-Farms – Dow Falls 0.5%
US stock markets had a mixed trading session yesterday as investors awaited the crucial Non-Farm Payrolls data due later today. US economic data was also varied, with the ADP employment report missing expectations by nearly 50,000, while the ISM Services PMI exceeded forecasts. The Dow Jones dropped 0.54%, followed by a 0.3% decline in the S&P 500. In contrast, the Nasdaq edged up 0.25%. Treasury yields dipped slightly, with the 2-year yield falling 1.6 basis points to 3.754%, and the 10-year yield dropping 3.2 basis points to 3.736%. The US dollar weakened further, slipping 0.2% on the dollar index, while oil prices hovered near 14-month lows, with Brent crude inching down 0.01% to $72.69 and WTI losing 0.1% to $69.15. Gold, however, saw a solid rally, gaining 0.9% to close the New York session at $2,515.93 per ounce.
Dollar Under Pressure Ahead of US Data
Investors are positioning themselves for today’s US employment figures, which are likely to shape the Federal Reserve’s upcoming rate cut in just under two weeks. The FX market is bracing for further downward pressure on the dollar if the Fed opts for a 50-basis point cut. The greenback has already dropped 5% from its 2024 highs, and should the Fed proceed with the larger cut, further losses are expected. The Non-Farm Payrolls report is always a significant event for traders, but in the current economic climate, today’s figure carries even more weight. The consensus forecast is for a 164,000 increase in jobs month-on-month, and any significant deviation from this figure could trigger substantial market moves. With the market increasingly leaning towards a larger rate cut, the bigger risk may lie in an upside surprise. However, volatility is likely, regardless of the outcome.
Quiet Calendar Day Before US Numbers
The macroeconomic calendar is relatively quiet today until the US session, when most traders are anticipating significant activity. The Asian and European sessions are expected to remain subdued, with only minor tier 3 data releases scheduled. Apart from potential position adjustments, rangebound trading is likely for much of the day. However, this will change dramatically once the US session begins and the key employment figures are released. The Non-Farm Payrolls report is expected to show a 164,000 increase, with the unemployment rate dipping by 0.1% to 4.2%. Any deviation from these expectations will likely result in market volatility. Canadian employment data is also scheduled for release at the same time, though it is expected to take a backseat to the US figures.
