03/09/2024 - 07:59 UTCThe dollar experienced a modest retreat on Monday, with the dollar index (USDX) shedding 0.11% of its recent gains but still hovering right below two-week highs. Investors brace for the upcoming U.S. payrolls data later this week which could be a key indicator, as that could influence the size of an expected interest rate cut from the Federal Reserve.
According to the CME's FedWatch tool, the market is currently pricing in a 69% chance of a 0.25% interest rate reduction by the Federal Reserve in September. While a larger cut of 0.5% is seen as less likely at 31%, there is still a significant probability of further easing in November, with odds currently standing above 41.5%.
U.S. equity futures traded sideways on Monday, as investors shifted their focus to a pivotal week for the American markets. The upcoming labor market report is highly anticipated, especially after the previous month's data fell short of expectations, triggering a sell-off in risk assets, which began with the disappointing ISM Manufacturing PMI the day before. In corporate news, Zscaler will be publishing its quarterly earnings report after US market closes on Tuesday while on Thursday, Q2 earnings from Broadcom are due.
The main cryptocurrencies by market capitalization, Bitcoin and Ethereum, gained sharply on Monday adding 3.24% and 4.63% respectively as the market enters into a pivotal month. Investors eagerly await the outcome of the September 18 FOMC meeting, a potential Kamala-Trump debate, and the TOKEN2049 conference, all of which could significantly impact global markets and cryptocurrency sentiment. The overall cryptocurrency market capitalization stands at 2.16 trillion dollars as at 07:10 AM GMT on Tuesday from highs of 2.78 trillion dollars seen in June.
In the energy sector, both WTI and Brent posted a solid recovery on Monday, following several consecutive sessions of losses the week before, adding 1.10% and 1.24% to their values respectively. The halt in oil exports from Libya, caused by political tensions between rival factions, was a major factor driving the recovery in oil prices. Political turmoil in Libya mainly involves disputes over control of the central bank and oil revenue.
The upcoming week will be marked by the release of several key economic indicators that could significantly impact market sentiment. These include the ISM Manufacturing PMI, initial jobless claims, non-farm payrolls, and the unemployment rate.
The EUR/USD pair saw a modest uptick on Monday ending the session 0.21% higher. Monday's trading opened with notably low volumes, with US markets closed in observance of the Labor Day holiday. Markets in the US will resume trading today, just in time to focus on a busy week filled with key US labor market data.
In Europe, key economic indicators, including EU Retail Sales and Gross Domestic Product (GDP) growth figures, are scheduled for release later in the week, on Thursday and Friday, respectively. However, the main focus for traders will be on a series of US labor reports, beginning with the JOLTS Job Openings for July, set to be released on Wednesday.
Gold prices declined on Monday as investors anticipated a series of U.S. economic data releases, which will provide further insight into the size of the Federal Reserve's expected interest rate cut later this month.
Market participants are focused on Friday's release of the U.S. August non-farm payrolls report, with economists surveyed by Reuters expecting the addition of 165,000 jobs.
Currently, traders are pricing in a 31% probability of a 50-basis-point rate cut at the Federal Reserve's September 17-18 policy meeting, with a 69% chance of a quarter-point cut.
Oil prices edged higher on Monday, recovering some of last week’s losses as Libyan oil exports remained halted and worries about increased OPEC+ production from October lessened. d 3.1%, respectively.
Major Libyan oil exports were halted on Monday, and production was reduced across the country, according to six engineers cited by Reuters. This disruption is part of an ongoing conflict between rival political factions over control of the central bank and oil revenues.
OPEC and its allies, collectively known as OPEC+, are set to proceed with planned increases in oil production starting in October.
U.S. main indexes posted minor movements on Monday due to the early close for the Labor Day holiday. Investors are shifting their attention to this crucial week for U.S. markets, with particular focus on the upcoming labor market data.
The weaker labor figures have sparked discussions about their underlying causes, with Hurricane Beryl being cited as a significant factor. Although the Bureau of Labor Statistics (BLS) stated that the hurricane, which struck Texas during the survey week for the July employment report, had "no discernible effect" on employment data, the household survey indicated otherwise.
The Federal Reserve, which closely monitors the labor market, will use the forthcoming labor report to help determine the size of its next interest rate cut, with options on the table being either a 25 basis points (bps) or a 50-bps reduction.
The materials contained on this document should not in any way be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy with respect to a financial instrument, in any manner whatsoever. Any indication of past performance or simulated past performance included in this document is not a reliable indicator of future results. For the full disclaimer click here.
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