The Gold
Gold experienced a significant price increase on Friday, immediately following the release of the Non-Farm Payroll (NFP) report. The economic data revealed that the United States created fewer jobs in August than previously anticipated. However, gold was unable to sustain its upward momentum as traders began to scrutinize other sectors of the US economy and their implications for interest rates. For instance, the unemployment rate unexpectedly fell to 4.2%, and average hourly earnings rose by 0.4% last month. This indicates that the US labor market may not be as weak as initially thought.
A comprehensive analysis of various interpretations suggests that the Federal Reserve (Fed) is more likely to reduce interest rates by more than 50 basis points. Consequently, such a rate cut could lead to an increase in gold prices and, conversely, a decline in the stock market.
The Euro
The Euro has been on an upward trajectory since early August, primarily driven by a weakening US Dollar Index (DXY). Investors had been optimistic about a 50 basis point interest rate cut by the Federal Reserve, which put significant downward pressure on the DXY. However, following the release of the NFP report, with the unemployment rate remaining steady and average earnings increasing, investor expectations for a Fed rate cut have diminished.
The upcoming US elections in November could introduce significant volatility into the markets and potentially reverse the direction of the dollar. However, the current performance of the Vice President (Harris) in polls has led markets to lower their expectations for sweeping policy changes. Consequently, investors may prioritize economic cycles over political cycles.
The Pound
Although the Pound has dipped below the 1.3100 USD support level, the overall uptrend remains intact unless sellers can push it below 1.3044 USD. Such a move could open the door for a deeper correction. Therefore, in the short term, the Pound is biased towards a downward movement.
In Monday’s European trading session, the UK’s FTSE 100 index rose by more than 0.5%, and US stock indices increased between 0.4% and 0.75%.
If no significant economic data is released in favor of the US, the dollar will struggle to maintain its strength.
The Oil
Brent crude prices have declined by more than 10% over the past week, now trading around $73 per barrel, nearing the lowest price level in nine months. Reports of production disruptions have failed to bolster prices, while the prospect of increased oil supply has exerted significant downward pressure. Despite OPEC+ postponing its production increase for at least two more months, Iraq and Kazakhstan have been forced to cut their output. The International Energy Agency forecasts a balanced oil market in the fourth quarter, anticipating increased buying and demand to support the energy market.