ADP Non-Farm Employment, US Jobless Claims, ISM Services PMI

A decline was seen in the dollar against most of its major peers on Wednesday. The dollar index shed 0.46%, reversing its recent gains and reestablishing the steep downward trend that had begun in July. This followed the July job openings report which revealed a cooling labor market, reinforcing the expectation of bigger rate cuts by the Fed. The data showed the lowest level of job openings in more than three years.

According to the CME's FedWatch tool, the market is currently pricing in a 55% chance of a 0.25% interest rate reduction by the Federal Reserve in September. While a larger cut of 0.5% is seen as less likely at 45%, there is still a significant probability of further easing in November, with odds currently standing above 49.7%.

The U.S. equity market experienced another decline on Wednesday, following labor market data and comments from a Federal Reserve official that bolster the case for an aggressive interest rate cut. The benchmark US 500 and the US tech 100 edged lower by 0.17% and 0.13% respectively while the US 30 ended 0.04% higher.

In corporate news, shares of Nvidia, which experienced a substantial decline in market capitalization of $279 billion on Tuesday, lost 1.68% of their value, following a precipitous drop of 9.55% in the preceding session. Shortly before the conclusion of trading, the company refuted a media report alleging that it had received a subpoena from the United States Department of Justice. Other large-cap growth stocks also experienced declines, including Apple, which closed 0.87% lower, Microsoft, which dipped 0.14%, Alphabet, which dropped 0.5%, and Amazon, which slipped 1.71%.

Within the energy sector, the two primary benchmarks, West Texas Intermediate and Brent crude, experienced further declines during the trading session on Wednesday, registering losses of 1.35% and 1.3% respectively. This occurred despite reports suggesting that the OPEC+ group was engaged in discussions regarding a postponement of a planned increase in oil production next month. Significant downward pressure on oil prices was exerted by news concerning a potential resolution of the ongoing dispute in Libya.

The forthcoming week is anticipated to be characterized by the release of several pivotal economic indicators that could have a substantial impact on market sentiment. These indicators include among others, US jobless claims, US non-farm payrolls, and the US unemployment rate. In the earnings calendar, second-quarter earnings from Broadcom are due.

EUR/USD

The EUR/USD pair advanced on Wednesday as investors shifted away from the US dollar.  With US labor data in focus, traders are closely watching Friday's Nonfarm Payrolls (NFP) report for further clues.

On the European front, retail sales data is the primary highlight this week. Pan-European retail figures for July, set to be released early Thursday, are expected to show a slight year-over-year recovery to 0.1%, following a contraction of 0.3% in the previous month.

In the US, the latest JOLTS Job Openings report showed a softer-than-expected result for July, with 7.673 million jobs added, falling short of the forecasted 8.1 million.

Gold

Gold prices turned higher on Wednesday, supported by a weaker U.S. dollar and declining yields, after U.S. job openings data pointed to the possibility of a significant rate cut by the Federal Reserve at its upcoming policy meeting.

Data showed that U.S. job openings in July dropped to their lowest level in over three and a half years. This fueled speculation that the Fed may opt for a 50-basis-point rate cut at its September 17-18 meeting, with futures markets now pricing in a 49% chance of this larger reduction, up from 41% prior to the data release. Gold, which offers no yield, generally benefits from a low-interest-rate environment.

WTI Oil

U.S. oil futures closed lower on Wednesday, even as hopes persist that major producers will continue to limit supply in response to ongoing concerns over demand growth.

The Organization of the Petroleum Exporting Countries and its allies (OPEC+) is reportedly considering postponing an output increase planned for next month.

Sentiment in the oil market has also been weighed down by weak U.S. manufacturing data, which raised concerns about the possibility of a recession in the world’s largest economy.

US 500

U.S. stocks ended slightly down in volatile trading on Wednesday, as labor market data and remarks from a Federal Reserve official fueled expectations for a potential interest rate cut later this month.

Data from the Labor Department revealed that U.S. job openings dropped to a 3.5-year low in July, suggesting a further softening of the labor market. This trend could support the Fed’s case for cutting rates at its next meeting.

The US 500 and US Tech 100 both edged lower, while the US 30 closed slightly higher.

Atlanta Fed President Raphael Bostic commented on Wednesday that the central bank should avoid keeping interest rates too high for too long, warning that doing so could cause undue harm to employment.

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