Nonfarm Payrolls data may show a weaker US labor market, raising rate cut expectations – but also exacerbating fears of a downturn. The all-important jobs report is set to rock Gold, stocks and all currencies.
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Why Nonfarm Payrolls may trigger a different reaction this time
The Federal Reserve conveyed a message that a "soft landing" is coming – a gradual return of the US economy to steady growth, without inflation. However, an increase in jobless claims and a downbeat ISM Manufacturing PMI already triggered fears of a downturn.
Investors need a "Goldilocks" Nonfarm Payrolls (NFP) report to be confident of a the soft landing scenario. That means another increase of around 200,000 jobs, and no increase in the Unemployment Rate beyond 4.1% reported last time.
Gold would benefit from a weak report, which would indicate rate cuts, while the US Dollar needs extreme data to rise. A super-strong NFP would increase rate hike expectations, buoying the Greenback, while a horrible outcome would trigger safe-haven flows toward the US Dollar. Only a balanced increase in jobs would hurt the currency.
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