US jobs data confirms bets of two Fed rate cuts. Dollar slides ahead of Powell testimony, US CPI numbers. Euro gaps down as French election results in hung parliament. Wall Street to fresh records, gold jumps, oil pulls back.
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Welcome to another episode of Global Market Insights, brought to you by XM.com, where we provide meaningful and informative content about the events that affect market trends and shape global markets. This is the Market Common Podcast at XM.com for Monday, July 8th by Haralambos Bizuros. I'm Cristina Marujos. The US dollar fell against all but one of its major counterparts on Friday with the only exception being the Canadian dollar. Although Friday's jobs data revealed that the economy added more jobs than expected in June, about 3/4 of that was government and healthcare services, with private payrolls coming in below estimates and cooperating the miss in Wednesday's ADP report. What's more, the unemployment rate rose to a 2.5-year high of 4.1%, which combined with a slowdown in wage growth, added credence to investors' belief that the Fed will proceed with two quarter-point rate cuts this year. This week attention is likely to turn to Fed Chair Powell's testimony before Congress on Tuesday and Wednesday. Although he is unlikely to deviate much from what he said in Portugal last week, the Q&A session may include more targeted questions that result in more clarity regarding the Fed's plans. That said, what could prove more determinant on whether market participants will maintain bets of two rate cuts this year may be the US CPI data on Thursday. A further slowdown in inflation may seal the deal in the eyes of investors and perhaps encourage some more dollar selling. The euro opened the week with a negative gap after France's election pointed to a Hong Parliament. In a surprise showing, the left this new popular front alliance took first place, with Macron's ensemble coming in second and Lipan's national rally finishing last. That said, the common currency traded higher soon after the opening, perhaps due to the Greenback's weakness, and as market participants began digesting the idea that Lipan's far-right national rally will not govern the nation. Now, investors will have to be patient and wait to see whether there will be any talks between the new popular front and Macron's ensemble to form a government. However, there are major differences separating the two parties, which have no tradition of working together. The leftists have already said they want to govern, and if this is through a minority government, France's role in the European Union is likely to weaken, while it will be hard for them to push through legislation domestically. All three of Wall Street's main indices traded in the Green on Friday with both the S&P 500 and the NASDAQ hitting fresh record highs after the U.S. employment report solidified expectations of two rate cuts by the Fed this year. Gold also gained on Friday, briefly exceeding the high of June 6 at $2388. However, the precious medal is pulling back today. Should Fed Chair Powell and the U.S. CPI data this week add to the rate cut narrative, the bulls are likely to recharge and perhaps start marching north again towards the record high of around $2450. Oil did not take advantage of the weaker dollar, coming under some selling pressure on rising expectations of a ceasefire in the Middle East. A first round of talks was already held and negotiations are expected to resume this week. On top of that, Mexico's major oil platforms are not expected to be affected by Hurricane Beryl, which may have also allowed some selling. Nonetheless, strong summer fuel demand and increasing expectations of two quarter point rate cuts by the Fed may keep any further losses in oil prices limited and short-lived. This was today's Marketcom and Podcast at XM.com. Have a great week. Thank you for listening to another episode of Global Market Insights brought to you by XM.com. For more in-depth technical and fundamental analysis, be sure to visit www.xm.com/research. [BLANK_AUDIO]
