Global Market Insights - Forex, Futures, Stocks

Spotlight on NFP as dollar sinks; pound unmoved by Labour landslide

Duration:: 3m
Broadcast on:: 05 Jul 2024
Audio Format:: mp3

Dollar slips further ahead of crucial US jobs report. Pound marginally higher as Labour crush the Tories in UK election. Equities set to end week on a high note, Bitcoin keeps slumping.

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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. Thank you for joining us at XM.com for the Market Common Podcast for Friday, July 5th by Raph Boiajian. I'm Kristina Madhujas. After a bit of a wobble last week, stock markets around the world are back in bullish mode following the weak ISM surveys for both manufacturing and services that bolstered expectations that the Federal Reserve will start cutting rates in September. A strong US economy has been a major factor in preventing the Fed from making pre-emptive rate cuts, despite some progress lately with inflation resuming its decline. But a weaker economic backdrop would make policymakers more confident that inflationary pressures would not flare up again if they lower interest rates. More specifically, it is the still tight labor market that's kept the Fed nervous about cutting interest rates too soon, as it's kept consumers from raining in their spending. But some signs are emerging of a cooldown in the jobs market as the unemployment rate ticked up to 4% in May, despite the upside surprise in the headline payroll's print. Nonfarm payrolls are expected to have risen by 190,000 in June versus 272,000 in the prior month. As the actual figure does not exceed 200,000 and there's no positive surprise in the jobless rate or average earnings either, markets would likely cheer the data. Nevertheless, with the US dollar trading a three-week lows against a basket of currencies, there is a risk that investors have positioned themselves not to be disappointed by today's jobs numbers. A shock-hot report could easily roll markets just as traders started to feel more hopeful of two Fed rate cuts this year, assigning an 80% probability for the first one arriving in September. Treasury yields have also pulled back, although the downside is limited given the concerns about even bigger budget deficits should Donald Trump win November's presidential election. Talking of elections, there were no surprises in the UK's general election, with labor winning a strong majority of more than 160 seats, and Rishi Su-Nex conservative party losing more than 250 seats in Parliament. There was little reaction in the pound, however, as the opinion polls proved accurate, so the prospect of a labor government has already been priced in by the markets. Cable is headed for weekly gains of more than 1%, and the euro is enjoying a similarly positive week. France also goes to the polls on Sunday for the second round of legislative elections, with centrist and left-wing parties agreeing to withdraw their candidates and constituencies, where there is a three-way runoff with the National Rally, there's been relief at the diminished prospect of a far-right government. The reduced political risks, combined with expectations of an imminent dovish pivot by the Fed, have lifted equity markets in Europe and America. U.S. futures point to slight gains when trading resumes today after the July 4th holiday, and major European indices are up too. Gold has also been edging higher this week on the back of the dollar sell-off, but there's been no let-up in Bitcoin slide. Liquidation fears are driving the panic-selling, while worries that a Trump presidency could be less crypto-friendly than the Biden administration are also weighing on crypto markets. This was the Marketcom and podcast at XM.com. Have a great weekend. [BLANK_AUDIO]