Strong U.S. jobs data is boosting expectations for a higher dollar and Fed. Growing tensions in the Middle East are pushing oil prices higher. Gold is falling as rising yields and a strong dollar reduce its appeal. Wall Street is collapsing, led by tech and AI stocks.
The US job market remains incredibly strong
The stock soared against all other major currencies on Friday after better-than-expected U.S. jobs data encouraged market participants to increase their bets. The greenback remained ahead early this week, gaining against some of its peers, albeit at a slower pace, and holding close to its Friday close against others.
Friday’s study found that the U.S. economy added 172,000 jobs in May, contradicting expectations for a much more modest gain of 85,000. Additionally, the April figure was revised upward to 179k from 115k initially, while that remained steady at 4.3%.
The report paints a picture of a surprisingly strong labor market, given the ongoing Middle East conflict and resulting energy crisis, giving the Fed the green light to pursue tighter monetary policy. According to federal funds futures, the market is now fully pricing in 30 basis point rate hikes from the Fed between now and December. This means that a 25 basis point increase is more than fully priced in for this year, while the probability of it being realized in September is now more than 50%.
With the upcoming meeting being the first for new Chairman Kevin Warsh, the Fed is unlikely to hit the hike button until September. After all, Warsh was appointed by US President Trump on the assumption that he had a less hawkish outlook than his predecessor Jerome Powell.
Next week, attention will likely turn to US data, where another month of warmer-than-expected numbers could increase the likelihood of a September hike and thus add more fuel to the dollar’s engines.
Escalation of Middle East conflict dashes hopes for peace
In the Middle East, tensions increased again, leading to a positive gap opening today and continuing its rise during the Asian session. Even though oil fell on Friday, perhaps under pressure from the dollar’s rally, today’s price…
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