Market Comment – Dollar plummets as US jobs data spread panic
Disappointing US jobs data push dollar off the cliff
Yen extends rally as fears over US economy mount
Stocks drop, VIX rallies to levels seen more than a year ago
![](https://www.xm.com/wp-content/uploads/2024/08/Perf-Aug05.png)
NFP report disappoints, rate cut bets surge
The US dollar plunged on Friday after the US employment report for July came in weaker than expected, raising fears about the performance of the US economy and prompting market participants to start believing that the Fed may need to cut interest rates by 50bps at the upcoming meeting in September.
Nonfarm payrolls increased by only 114k, missing the forecast of 175k, while the unemployment rate rose to 4.3%, confounding expectations for an unchanged rate of 4.1%. Wages were also weaker than expected, with the y/y rate sliding to 3.6% from 3.8%.
Apart from nearly fully pricing in a double rate cut in September, investors are now seeing around 127bps worth of easing by December, as the weak data triggered what is known as the “Sahm Rule”, which indicates that a recession is already underway when the three-month moving average of the national unemployment rate rises half a percentage point above its low from the previous 12 months. That level was breached with the July data on Friday.
Today, traders may turn their attention to the ISM non-manufacturing PMI for July for more signs of how the economy entered the third quarter. The forecast points to a rebound back above the equilibrium 50 zone, which could calm investors’ nerves and serve as a message that 127bps worth of reductions this year is probably an unrealistic scenario. The dollar may experience a relief bounce as traders remove some basis points worth of reductions, but should this data disappoint as well, the greenback’s free fall is likely to continue.
Should this data disappoint as well, the greenback’s free fall is likely to continue
Yen skyrockets as US-Japan yield spread narrows
The yen was the main winner, gaining nearly 2% on Friday and extending its rally by another 2% already today. The risk-linked currencies were the ones that gained the least against the US dollar.
This indicates that the yen has reclaimed its safe-haven status, stealing some shine from gold, which failed to match its record high on Friday and is correcting lower today, despite the initial spike north due to the dollar’s slide.
Following the intervention episode by Japanese authorities on July 11, investors may have decided to unwind profitable carry trades as risk appetite began to deteriorate, with the bigger-than-expected rate hike by the BoJ adding an extra boost.
This, combined with the overly dovish repricing of the market on Friday and thereby the drop in Treasury yields, significantly widens the yield differentials between the US and Japan and adds fuel to the yen’s engines.
This, combined with the overly dovish repricing of the market on Friday and thereby the drop in Treasury yields, significantly widens the yield differentials between the US and Japan
Wall Street drip, Nasdaq confirms correction
All of Wall Street’s main indices dropped by more than 1.5% on Friday, with the tech-heavy Nasdaq tumbling more than 2.5%. This suggests that we are back in an environment where bad news is actually bad, and it is not cheered by the stock market anymore due to increasing expectations of lower borrowing costs.
This suggests that we are back in an environment where bad news is actually bad
Market participants are now concerned that the Fed may have already waited too long to start easing monetary policy, and the fear is evident by the sharp spike in the VIX index to levels last seen more than a year ago.
The Nasdaq is already down more than 10% from its record high, hit on July 11, confirming that it is in a correction, as concerns about high valuations in a weakening economy grew.
Having said all that though, the latest market moves may be overstretched considering that they are the result of one data set. Therefore, with the first sign that the US economy is holding better than feared, some market participants may see an opportunity to buy stocks at cheaper prices.
![](https://www.xm.com/wp-content/uploads/2024/08/Calendar-Aug05_1.png)
Relaterade tillgångar
Senaste nytt
Ansvarsfriskrivning: XM Group-enheter tillhandahåller sin tjänst enbart för exekvering och tillgången till vår onlinehandelsplattform, som innebär att en person kan se och/eller använda tillgängligt innehåll på eller via webbplatsen, påverkar eller utökar inte detta, vilket inte heller varit avsikten. Denna tillgång och användning omfattas alltid av i) villkor, ii) riskvarningar och iii) fullständig ansvarsfriskrivning. Detta innehåll tillhandahålls därför uteslutande som allmän information. Var framför allt medveten om att innehållet på vår onlinehandelsplattform varken utgör en uppmaning eller ett erbjudande om att ingå några transaktioner på de finansiella marknaderna. Handel på alla finansiella marknader involverar en betydande risk för ditt kapital.
Allt material som publiceras på denna sida är enbart avsett för utbildnings- eller informationssyften och innehåller inte – och ska inte heller anses innehålla – rådgivning och rekommendationer om finansiella frågor, investeringsskatt eller handel, dokumentation av våra handelskurser eller ett erbjudande om, eller en uppmaning till, en transaktion i finansiella instrument eller oönskade finansiella erbjudanden som är riktade till dig.
Tredjepartsinnehåll, liksom innehåll framtaget av XM såsom synpunkter, nyheter, forskningsrön, analyser, kurser, andra uppgifter eller länkar till tredjepartssajter som återfinns på denna webbplats, tillhandahålls i befintligt skick, som allmän marknadskommentar, och utgör ingen investeringsrådgivning. I den mån som något innehåll tolkas som investeringsforskning måste det noteras och accepteras att innehållet varken har varit avsett som oberoende investeringsforskning eller har utarbetats i enlighet med de rättsliga kraven för att främja ett sådant syfte, och därför är att betrakta som marknadskommunikation enligt tillämpliga lagar och föreskrifter. Se till så att du har läst och förstått vårt meddelande om icke-oberoende investeringsforskning och riskvarning om ovannämnda information, som finns här.