FX: Small non-agricultural and US GDP data fell short of expectations

On August 31st, the U.S. economy grew at a slower pace in the second quarter, and other data reports showed that employment is also slowing. The August labor market data is significant because Federal Reserve Chairperson Jerome Powell said at the Jackson Hole symposium that inflation has become more sensitive to the labor market.

Thursday (August 31) Asian morning trading, spot gold continued to rebound, gold prices have now exceeded $1945/ounce. As of press time, spot gold was reported at $1946.76/ounce, an increase of 0.22%.

Gold rose for a third straight session on Wednesday as weak US labour market data fuelled dovish bets on the Federal Reserve.

Gold ended higher on Wednesday as the dollar and Treasury yields fell as more weak US data strengthened expectations that the Federal Reserve would pause interest rate hikes. Spot gold closed up $5 at $1,942.42 an ounce, reaching an intraday high of $1949.10 an ounce.

Looking at the daily chart, the short-term outlook for gold is bullish, as the Relative Strength Index (RSI) shows a clear upward slope in the positive area. In addition, the MACD green column gradually rises and magnifies, indicating that the gold bulls are making progress. Looking at it from a larger perspective, the gold price is trading above the 20-day simple moving average and the 200-day simple moving average, indicating that the bulls are recovering a lot of lost ground in the short term.

Martín added that traders should be aware of a potential bullish crossover between the aforementioned averages, which could further boost gold buying momentum.

Resistance Levels: $1950/oz; $1955/oz (100-day moving average); $1970/oz

Support levels: $1940/oz; $1930/oz; $1915/oz

The U.S. Labor Department reported Tuesday that the number of JOLTS job openings in the United States in July was 8.827 million, the lowest level since March 2021 and far short of the 9.465 million expected by the market.

The employment report released by Automated Data Processing Corporation (ADP) on Wednesday showed that the number of ADP jobs in the United States, known as "small non-farmers", increased by 177,000 in August, the smallest increase in five months, less than the expected 195,000, and well below the 324,000 in July. The report shows that the US labor market demand is gradually slowing due to the Federal Reserve's continued interest rate hikes.

Previously, the government reported that there were 1.51 job vacancies per unemployed person in July, the lowest rate since September 2021, compared with 1.54 in June.

Nela Richardson, chief economist at ADP, said this month's data was consistent with the pace of job creation before the epidemic. After two years of exceptional growth associated with the economic recovery, wages and employment are moving towards more sustainable growth as the impact of the epidemic on the economy fades.

The data released on the same day not only unexpectedly revised the annualized quarterly rate of real GDP in the second quarter (from 2.4% to 2.1%), but also lowered the GDP price index (from 2.2% to 2.0%) and the PCE price index (from 3.8% to 3.7%).

After the data was released, the CME "Fed Watch" showed that the probability of the Federal Reserve maintaining interest rates unchanged at 5.25% -5.50% in September was 88.5%, and the probability of raising interest rates by 25 basis points to the range of 5.50% -5.75% was 11.5%; the probability of maintaining interest rates unchanged by November was 49.2%, the probability of a cumulative increase of 25 basis points was 45.7%, and the probability of a cumulative increase of 50 basis points was 5.1%.

The August labor market data is significant because Federal Reserve Chairperson Jerome Powell said at the Jackson Hole symposium that inflation has become more sensitive to the labor market's response. On Tuesday, the U.S. Bureau of Labor Statistics reported weak labor demand in July. JOLTS job openings fell to 8.83 million in July from 9.17 million in June. Meanwhile, the number of resignations was the lowest since early 2021. This suggests that either U.S. companies are struggling to retain talent or the workforce is losing confidence.

Weakness in key US jobs data suggests the labour market is losing its resilience and has bolstered hopes of a soft landing for the Federal Reserve. Weaker-than-expected job openings have raised hopes that the Fed will make a decision on stabilising interest rates at the September meeting of the Federal Open Market Committee.

In this data-filled week,FXTForex reminds investors that they will turn their attention to the non-farm payrolls data (NFP) for August, which will provide an in-depth look at labor market conditions.