Head of Macroeconomic Research
Summary: The whisper number for today's jobs report is dropping fast. Based on the latest ISM employment index, we look for a big miss.
The official estimate for September NFP report is 146,000. Based on the ADP report and the latest ISM employment index (which has a very decent correlation of 0.6 with MoM NFP change), we look for a big NFP miss today.
If our forecast is right, be ready for a very negative market reaction and higher pressure on the Fed to cut rates this month. Ahead of the NFP release, the implied probability of Fed rate cut in October is standing at 87% on the back of the ugly ISM manufacturing index and ISM Non-Manufacturing index.
On the top of that, it’s never good news when Fed hawks become dovish. Look at what Fed’s Kaplan said yesterday confirming that he is inclined to take action if economic deterioration continues: “I would rather use adjusting the Fed funds rates…when it matters, which I think is doing it sooner rather than late”.
To conclude, this is a quick sum up of what we have learnt this week on the US economy:
And, we will probably have the confirmation in a couple of hours that risk of higher unemployment is on the rise due to high business uncertainty related to trade war and fear of recession. This is the perfect set up for risk aversion and higher XAUUSD.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
