The past week brought a major surprise to the markets in the form of the US labour market report (NFP). An increase in employment of 162,000 jobs (against a forecast of just 55,000) drastically altered expectations regarding the outlook for interest rates in the US. This turn of events strengthened the dollar and put immediate pressure on commodities. As we enter the new week, attention is shifting to the next key drivers: central bank decisions, inflation figures and corporate earnings reports, which will shape volatility in the coming days. In light of this, it is worth keeping an eye on markets such as the US100 (Nasdaq 100 futures), EURUSD and GOLD (Gold).
US100 (Nasdaq 100)
The US technology index managed to recoup some of its losses from the previous week, despite mixed market performance following the release of the NFP report. Nevertheless, the data shows that the US economy remains strong. However, Thursday’s financial reports will be the real test of this optimism. The release of results by Oracle (with a forecast earnings per share of US$1.75) and Adobe will be key. In particular, it is worth paying attention to the value of Oracle’s contracted but not yet fulfilled orders and its forecasts for the coming quarters, as the company acts as a barometer for spending on cloud computing and artificial intelligence. On Friday, tech company valuations will be influenced by the US CPI inflation reading.
EURUSD
The main currency pair will start the coming week with diminished hopes that interest rates will remain unchanged. With very strong labour market data and high oil prices, the balance is clearly tipping towards a potential rate rise. On Thursday, the European Central Bank will announce its decision on interest rates. The market currently prices in a rate rise as almost certain. This decision will send a clear signal that inflation in Europe is still viewed as too high. However, the tone of the press conference and the ECB’s new economic forecasts will be crucial for the euro exchange rate. As for the dollar, Friday’s CPI inflation reading (forecast: 3.4% y/y) will determine the direction; following the strong labour market report, this has gained significance in assessing the Fed’s next moves.
GOLD (Gold)
It seemed that gold was set for a marked rebound this week, but rising expectations of a rate rise in the United States could lead to further short-term pressure on the precious metal. Nevertheless, investors’ attention, aside from US economic data (primarily inflation), will focus on ongoing problems in the US bond market. Despite the increased risk of interest rate rises, the market is seeing growing fiscal problems in the US, as illustrated by the continued high levels of gold holdings in ETFs and the further unwinding of long positions in futures contracts on the US and Chinese markets.
🟡Gold drops sharply following strong NFP
BREAKING: NFP with a massive upside; EURUSD dips 🚨
Will NFP force the Fed to hike rates?
Bitcoin above $80k ahead to the US NFP report
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
