Global Markets Slide Following Disappointing US Jobs Data
Global stocks dropped sharply on Friday after a weaker-than-expected US jobs report heightened concerns of an economic slowdown. The August non-farm payrolls report showed 142,000 new jobs, falling short of the forecasted 165,000. Additionally, the previous two months’ figures were revised downward, with July's numbers reduced from 114,000 to 89,000, and June’s from 206,000 to 179,000. US stock markets reacted negatively to the news, with the S&P 500 falling by 1.7% and the Nasdaq dropping 2.6%.
Key US Inflation Data and Central Bank Decisions to Shape FX Markets This Week
FX markets will be influenced by critical economic data releases and central bank announcements this week, with a focus on the US Consumer Price Index (CPI) and the European Central Bank's (ECB) policy decision. The US CPI data for August, scheduled for release on Wednesday, will offer crucial insights into inflation trends in the world’s largest economy. On Thursday, the ECB’s rate decision will be closely monitored as investors gauge the bank’s approach to managing inflation and fostering economic growth in the Eurozone. The ECB is anticipated to lower rates by 25 basis points, with the main attention focused on the communication and specifics of the ECB staff projections.
In Asia, China's inflation and trade balance figures, due Tuesday, will provide key indicators of the health of the region’s largest economy and its potential effects on regional currencies.
British Pound Gains Strength Ahead of Key Economic Data
GBP has shown resilience, bolstered by positive economic data suggesting accelerated growth over the summer. This momentum, along with the Bank of England’s cautious stance on further rate cuts, has driven GBP/USD close to the $1.32 mark, nearing 30-month highs. Despite the uptrend, resistance is noted at $1.3265, while support holds at $1.3050.
The pound posted its strongest gains against commodity currencies, particularly the AUD, NOK, and NZD, but underperformed against safe-haven currencies like the Japanese yen and Swiss franc, resulting in the Pound Index closing 0.2% lower for the week. Meanwhile, the pound has recovered its August losses against the euro, approaching the mid-€1.18 level, edging near 2024 highs. However, seasonality trends for the second half of the year are typically unfavourable for the pound, which could limit further gains, even with the ECB potentially shifting its focus to growth concerns. Notably, one-week EUR/GBP implied volatility has hit a three-week high ahead of the ECB rate decision.
Upcoming data releases, including UK employment figures on Tuesday and July’s GDP data on Wednesday, will play a key role in determining the pound’s short-term trajectory.
