Weekly Outlook: Fed rate cuts loom

October 05, 2024 (MLN): Following the Fed Chairman's remarks that two more normal sized rate cuts are likely, market pricing for the rate cut from 33% increased until Thursday. 

The September non-farm payroll (NFP) data on Friday exceeded all forecasts, with employment growth rising dramatically by over 100,000, exceeding what was anticipated. 

The unemployment rate also fell to 4.1%. Treasury yields and the US dollar both rose in response to the US jobs report. 

The market will begin concentrating on the US inflation and growth indicators following the surprisingly high jobs report. 

November marks the deadline for one more employment report prior to the FOMC's next meeting. The US bond yield curve abruptly rose as the Dollar index increased and the Japanese Yen suffered. However, because of geopolitical unrest, gold after hitting the weekly lows popped up. 

Due to the weekend, traders most likely avoided exposure and shied away from taking chances. 

Another useful measure of market sentiment is oil. Brent has already moved up by 8% this week, with a 2% surge on Friday. 

The market is concerned that if Israel retaliates by attacking Iranian oil facilities and then if Iran launches a counterattack against Israel's energy and oil installations, this might escalate the situation to uncharted territory. 

As a result, it is extremely difficult to predict the direction of the global financial market. 

While the US elections are another element influencing the mood of the market as it searches for direction. 

This week, given the economic hardship that almost every nation is facing, the market will once again be focused on the state of the world economy. 

Additionally, the Russia/Ukraine conflict, which the world cannot ignore, is the cause of the turbulence in the financial markets and might further destabilise the global economy. As a result, the state of the market will continue to be erratic.

#GOLD @ $ 2653.30 – The main risk is Middle East instability. This week gold is expected to come under pressure. A clear $ 2638 break will pave way for $ 2618–20.

On the upside, break of $ 2668-70 risks $ 2684.

#EURO @ 1.0972 - Euro is expected to hold 1.1060 for 1.0920 or 1.0850. Otherwise 1.1090.

#GBP @ 1.3113- Pound Sterling is anticipated to continue to face resistance and should hold below 1.3210. On the flip side, it must breach 1.3020-40 for 1.2970-80.

#JPY @ 148.65- USD has strong resistance around 149.80-90. It will likely decline following a temporary upswing. A break 147.20-40 will open doors for 145.90.

The writer is the former Country Treasurer of Chase Manhattan Bank

Disclaimer: The views and analysis in this article are the opinions of the author and are for informational purposes only. It is not intended to be financial or investment advice and should not be the basis for making financial decisions.