Recent data from the U.S. Labor Department showed a significant rise in nonfarm payrolls for September, adding 254,000 jobs. This increase surpassed market expectations of 140,000 and marked the largest gain since March 2024. The unemployment rate fell to 4.1%, its lowest since June 2024, while the annual wage growth rose to 4.0%, the highest since May 2024. This optimistic data has influenced investor sentiment positively.
Revised figures show July's job additions corrected from 89,000 to 144,000, and August's from 142,000 to 159,000, with a combined increase of 72,000 over prior estimates. In September, unemployment rates for adult men decreased to 3.7%, while rates for adult women (3.6%), teenagers (14.3%), whites (3.6%), blacks (5.7%), Asians (4.1%), and Hispanics (5.1%) remained almost unchanged.
The release of these figures shifted market expectations regarding Federal Reserve rate cuts, resulting in the U.S. dollar index (DXY, Financial) rebounding by 60 points, surpassing 102. Concurrently, spot gold plunged by $18, continuing a downward trend. The British Pound (GBP/USD) fell below 1.31, down 0.19%, the Euro (EUR/USD) dropped 0.50% to 1.0974, and the Australian Dollar (AUD/USD) decreased over 0.50% to 0.6806.
Moreover, the 10-year U.S. Treasury yield reached its highest level since August, at 3.959%, while the 2-year yield increased to 3.876%. Market sentiment now anticipates less than 100 basis points of rate cuts from the Federal Reserve over the next four meetings. Analysts suggest that the strong employment data could prompt the Fed to hold rates steady, delaying potential rate cuts.
Short-term U.S. interest rate futures dropped as traders adjusted forecasts for forthcoming rate reductions. Following the robust employment figures, traders are betting on a 25 basis point rate cut by the Fed in both November and December. This outlook could bolster the dollar while diminishing gold's appeal as a safe haven. Analyst Dhwani Mehta warns of downside risks for gold, especially if prices fall below $2623, potentially moving towards $2600.
Geopolitical tensions in the Middle East continue to influence market moods. U.S. President Biden's recent statements on potential action against Iran have heightened market uncertainties. Ajay Kedia from Kedia Commodities asserts that geopolitical risks could sustain high gold prices, though strong employment data may reduce demand for gold as a hedge.
Overall, the robust U.S. nonfarm payroll data is shaping Federal Reserve policy expectations, potentially strengthening the U.S. dollar and applying pressure on gold. Traders should monitor subsequent data closely to adjust their investment strategies.
