Dollar steady, stocks pare post-NFP weakness
Updated Updated Mon, 2025 August 4 11:05
* USD gains modestly after Fed turmoil, Trump shake-up and NFP
* Stock indices post biggest daily % gains since May on Friday rebound
* Gold climbs on fed rate cut speculation, economic concerns
* Palantir tops Q2, raises full-year forecast, stocks jumps
FX: USD traded marginally in the green, after it initially tried to claw back some gains from last Friday. That saw a huge sell-off on the US labour market data disappointment as it put a completely different light on what has been happening in the US economy since the early April ‘Liberation Day’ announcements. Just to highlight – June job gains, which were originally 147k are now 14k, and May’s initially reported gain of 144k is now 19k. The firing of the BLS head is not a good look either, while a new FOMC member is very, very likely to be dovish.
EUR underperformed after Friday’s jump higher post-NFP jobs data. Two-year EUR/USD rate differentials moved to the narrowest levels of the year on the view that the Fed is about to play catch-up with this year’s ECB easing. CHF was sold aggressively after Trump slapped Switzerland with 39% tariffs. They could add to disinflationary forces.
GBP bounced for a second day, after hitting the major Fib level (38.2%) of this year’s rally at 1.3140. All eyes are on this week’s BoE meeting where a rate cut is strongly favoured by markets and City economists. The question is whether the MPC hints at a faster pace of policy easing in the coming months, than its current quarterly pace on MPR meetings.
JPY strengthened again after its big move last Friday, as Treasury yields collapsed on the back of Fed rate cut bets ramping up again. Prices broke down through the 200-day SMA at 149.47. There is a lack of top tier Japan data early this week.
AUD built on its post-NFP gains as prices found support at the midpoint of the October to April drop at 0.6427. CAD strengthened for a second day after six straight days of weakness. The major hit highs last seen in May at 1.3879 on Friday before succumbing to dollar selling. The 50-day SMA is at 1.3724 with focus on trade talks and the Canadian jobs report later in the week.
US stocks: The S&P 500 printed up 1.47% at 6,330. The Nasdaq settled higher, by 1.87% at 23,189. The Dow Jones finished up at 44,174, adding 1.34%. All sectors were in the green except for energy with communication services and tech rising over 2%. Energy was the only sector in the red amid lower crude and natural gas prices after President Trump said that he will substantially raise the tariff paid by India to the US due to its big buying of Russian oil, and selling it on the open market by profits. Palantir beat expectations across the board and topped $1bn in revenue for the first time while boosting its guidance. Ahead of its results, it was awarded a $10bn contract by the US Army. The stock was up around 4% after hours. The Tesla committee approved an award of 96mn shares of restricted stock to CEO Elon Musk.
Gold bounced for a third straight dayand rose above the 50-day SMA at $3,342. It had found support last week around the Fib level (23.6%) of this year’s rally at $3,283. The late July highs are around $3,438. Poor risk sentiment and rising Fed rate cut expectations have perked up gold bugs.
Day Ahead – US ISM Services
July non-manufacturing ISM is forecast to rise to 51.5 from 50.8. Orders rebounded in the last report, but employment contracted for the third time this year over tariff uncertainty. The recent July PMI services data suggested an overreliance on this part of the economy as the tariff front running boost to manufacturing faded.
A PMI reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of the economy. Prices paid components will be watched as they have been rising recently, as the levy impact feeds through into broader businesses and the economy.
Chart of the Day – Dow taps support ahead of more earnings
The Dow Jones suffered its biggest weekly drop since Liberation Day in early April. The index of 30 stocks fell over 2.9% after the 1.2% sell-off after Friday’s NFP, its worst day since mid-June. Earnings on tap this include Dow heavyweights like Disney, McDonald’s and Caterpillar, plus Palantir. They will give us further insights into the broader economy while risk sentiment will be governed by the ongoing tariff drama, the reaction to the shocking US job numbers and Fed rate cut expectations. The Dow touched its 50-day SMA at 43,484 on Friday but closed above it. The 200-day SMA is below at 42,882. Bulls will look for decent company earnings to push it back closer to the record top above 45,000.
