Forex Market Analysis: US Jobs Data Update and ECB Rate Cut

2024/06/03

CURRENCIES

Key Events and Predictions:

• ECB Rate Decision:
  • ECB to cut interest rates by 25 basis points on Thursday.
  • Possible timing of the next cut: Markets suggest September 12th or more likely October 17th.
  • Importance of ECB President Christine Lagarde’s signals on future cuts.
  • ECB post-decision press conference to be closely monitored.
• US Jobs Data:
  • US jobs week concludes with NFPs on Friday.
  • Prior releases include JOLTS, ADP, and initial jobless claims.
  • Market’s view on US rate cuts pushed back due to high inflation.
  • Any weakening in the US job market may prompt re-pricing of US interest rate cuts.

Market Movements and Technical Analysis:

• US Dollar (USD):
  • USD under pressure, nearing a two-month low.
  • USD index is testing the 200-day simple moving average.
  • A confirmed break lower could see USD trade below 104.00.
• Gold:
  • Gold is vulnerable to a move lower.
  • Rise in US Treasury yields influencing gold prices.
  • Target level: $2,280/oz.
  • Friday’s NFPs will be critical for gold’s future performance.
• Nasdaq 100:
  • Index turned lower, affected by performance in Magnificent Seven members.
  • Pullback from a sharp early sell-off.
  • Friday’s price action will be crucial for potential recovery.
  • Index remains vulnerable due to its concentration in a few mega-cap companies.

STOCK MARKET

Key Market Indices:

• Nasdaq Composite (IXIC): Near flat over the past five trading sessions.
• S&P 500 (GSPC): Rose less than 0.2%.
• Dow Jones Industrial Average (DJI): Down nearly 1%.

Market Performance in May:

• Stocks stumbled at the end of May.
• Investor enthusiasm for AI paused.
• Concerns over Federal Reserve holding interest rates higher for longer.

Upcoming Labour Market Data:

May jobs report expected:

• Forecast: 185,000 nonfarm payroll jobs added.
• Unemployment Rate: Expected to hold steady at 3.9%.
• April Data: 175,000 jobs added, unemployment at 3.9%.

Inflation Insights:

• PCE Index Update:
  • April reading showed a 0.2% increase from the prior month.
  • Lowest monthly increase in 2024.
  • Economists noted it as better news on inflation compared to Q1.
  • Investors’ interest rate cut expectations remained unchanged.
• Federal Reserve Outlook:
  • Officials require “greater confidence” in inflation’s decline before cutting rates.