NFP wraps up chaotic week
European markets are off to a slightly more positive start, having spent much of Thursday in the red as China cast doubt over a comprehensive trade deal with the US.
The US NFP report caps off another chaotic week in the markets, one in which the Fed has cut interest rates again, the US and China have moved closer to a phase one agreement and the UK has, kind of, hopefully, maybe moved closer to leaving the EU while not actually leaving as planned.
The report is expected to be unusually weak but will be distorted by the General Motors (NYSE:GM) Strike so we shouldn’t read too much into it. We’d have to see a pretty appalling report to worry traders at this point, although it will be interesting to see just how quickly they start pricing in another Fed rate cut.
Earlier this week, the markets demanded and the Fed delivered a third consecutive rate cut, easing recession fears for now but I feel it won’t take much to reignite them. A terrible jobs report today would certainly aid that, although if the US and China can secure this deal in the coming weeks, those fears would be somewhat alleviated.
USD softness continues to build bullish Gold case
The US dollar has continued to trend lower this week even as the Fed delivered a somewhat hawkish rate cut but completed the trio, as demanded by the markets. Gold had been trending lower having entered into correction mode but the softer dollar proved a major obstacle and bullish pressures have been building.
The inability of the yellow metal to break below $1,480 again further feeds this narrative and once again gold has its eyes on $1,520. A break above here could give gold a new bullish lease of life and the early September peak may be on the horizon.
Oil pares gains this week
Oil prices are treading water this morning having spent much of the week paring gains. Brent has broken back below $60 but I don’t think that’s anything to worry about. Crude has been closely tied to global growth expectations and while the outlook is still troubling, it’s arguably less so than it has been after the Fed cuts and trade talks.
A break below $58 would suggest traders are not growing in optimism as they’d appeared but we’re still some way from that level at the moment. The key level to the upside remains $62, which has been long-term support and resistance, including earlier this week.
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