The US job market is causing concerns about a possible recession. The recent data showed that the unemployment rate rose to 4.3%, triggering the SAHM rule which indicates a recession may be underway. This news has led to significant revisions in rate cut bets for the US, with fears of a recession affecting global markets. Market participants are now pricing in a 71.5% chance of a 50bps rate cut in September, with more cuts expected later in the year.
The tech sector has also been hit hard, with the Magnificent 7 tech companies losing nearly $1.75 trillion in market capitalization over the past 10 days. This loss is almost 50% of Apple’s total market cap, showing the magnitude of the impact on the market. The US Dollar has also been affected, breaking below support levels and allowing other currencies like the EUR and GBP to gain against it.
Looking ahead, the upcoming week is expected to be eventful. Geopolitical tensions, especially in the Middle East, could impact the market, leading to fluctuations in safe-haven assets like the US Dollar and gold. The focus will also be on Asia Pacific data, with key releases from China and Australia. The Reserve Bank of Australia (RBA) meeting will be closely watched for any signs of a dovish pivot.
In Europe, the US, and the UK, the economic calendar is relatively light, with market participants paying attention to any hints from Fed policymakers. Geopolitical tensions are likely to be a major factor influencing markets in the absence of high-impact data releases. The US Dollar Index (DXY) will be a key chart to watch, with support levels at 103.00 and 102.64, and resistance levels at 103.50 and 104.29. The DXY’s movements next week could provide important insights into the market’s direction.