As we near the end of the summer, activity will start to pick up again and that may begin this week in the build-up to Friday’s jobs report.
With Jackson Hole behind us, and not really living up to the usual hype, the focus now switches to the September central bank meetings and the key data releases that could sway them one way or another as policymakers ask themselves whether they’ve already done enough.
From the Fed’s perspective, the week is off to a promising start with the JOLTS job opening report much softer than expected, alongside downward revisions to the previous month. The Fed needs to see a softer labor market to be confident that price pressures aren’t just abating but substantially and sustainably and this report is a move in the right direction.
Job openings are now back at levels last seen in the summer of 2021 and not too far from where they were pre-pandemic. Further softness over the next few months looks very plausible which could contribute to a cooler labor market and sustainably lower wage growth.
The CB consumer confidence number also suggests households are still wary, although the survey can be quite volatile and correlated with factors such as stock markets and gas prices, as we’ve seen the last couple of months alone.
Oil steadies but may be vulnerable to spikes
Oil prices appear to be stabilizing around the middle of their new higher range, in the aftermath of OPEC+ cuts (voluntary Russia and Saudi in particular). Brent crude currently sits a little shy of $85 after rebounding higher off $82 last week and peaking just above $88 earlier this month.
There remains considerable uncertainty around the outlook for the global economy, from China’s sluggish rebound to interest rates and possible recessions elsewhere. But on the supply side, major producers appear committed to ensuring the market remains tight and prices higher. They had little success earlier in the summer but that is no longer the case and the market is now vulnerable to spikes on the back of surprise outages and hurricane-related issues in the US.
Gold buoyed by JOLTS data as yields and the dollar slide
Gold is making decent gains on Tuesday, buoyed by a softer dollar and lower yields on the back of the US JOLTs data. The US 2-year yield slipped back below 5%, while the greenback has come off its highs to trade down on the day.
The summer narrative of higher yields for longer that has lifted the dollar and longer-term yields at the expense of the yellow metal could be put to the test this week with GDP, inflation, jobs, and PMI releases all still to come. It’s started well for gold but it may still have a mountain to climb after coming under significant pressure since late July.
For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/
Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA
