Markets stayed modestly positive, even as geopolitical and trade tensions rose, supported by dovish Federal Reserve (Fed) bets after the U.S. Bureau of Labor Statistics (BLS) reported a record revision to U.S. Nonfarm Payrolls (NFP). The March 2025 employment level was cut by -911K or -0.6%, worse than forecasts of -682K, fueling concerns about U.S. jobs and supporting expectations of Fed easing. Still, the U.S. Dollar (USD) recovered from its initial dip, as Fed Chair Jerome Powell had already warned at Jackson Hole that payrolls would be “revised down materially.” The Fed’s rate path was largely unchanged, and odds of a 50 bps cut next week slipped.
Elsewhere in U.S. data, the NFIB Small Business Index rose to 100.8 in August, a seven-month high (vs. 100.5 expected, 100.3 prior). JPMorgan CEO Jamie Dimon said a fresh Labor Department report confirmed the U.S. economy is losing momentum. U.S. Treasury Secretary Bessent expressed confidence that the Supreme Court will uphold Trump’s tariffs and said she will outline plans to preserve USD dominance.
The USD rebound also reflected rising geopolitical tensions. In the Middle East, explosions in Qatar’s Doha region targeted a senior Hamas official. Israel confirmed it was an assassination attempt but failed to eliminate the target. The strike drew criticism from Doha and international groups, and the White House assured Qatar that such incidents would not happen again. In Europe, Russia escalated against Poland and NATO, and Poland confirmed a military operation against a Russian incursion, deploying weapons. A U.S. member of Congress called it an act of war, but markets barely reacted to Russia’s incursions into NATO airspace.
Earlier in the week, the U.S. Supreme Court allowed President Donald Trump to remove FTC Commissioner Rebecca Kelly Slaughter, raising concerns over federal agency independence, including the Fed. However, a federal judge blocked Trump from firing Federal Reserve Board Governor Lisa Cook, meaning she will vote at the September Federal Open Market Committee (FOMC) meeting. The Supreme Court also agreed to fast-track its review of Trump’s tariffs, with arguments scheduled for November.
On trade, Trump said negotiations with India are ongoing, while urging the European Union (EU) to impose tariffs of up to 100% on Chinese and Indian goods, per Reuters. This is part of Washington’s push to pressure Russian President Vladimir Putin by targeting Moscow’s major oil buyers.
In Asia, China’s August inflation showed CPI -0.4% y/y (vs. -0.2% expected, prior 0.0%), the sharpest fall in six months, while PPI -2.9% y/y (in line with forecasts, prior -3.6%) marked the smallest drop in four months. In Japan, the Reuters Tankan survey showed manufacturers’ confidence rose to +13 in September (vs. +9 in August), the highest since August 2022, with sentiment expected to ease slightly to +11 by December. The non-manufacturing index improved to +27 (vs. +24 prior).
On commodities, a private survey showed a crude oil inventory build instead of the expected draw, but oil prices stayed firm amid geopolitical risks.
Equities ended higher after initial volatility. Oracle’s earnings and revenue missed forecasts, but shares soared after-hours as investors focused on strong cloud growth projections and major new contracts. The company expects to sign more multi-billion-dollar customers, with Remaining Performance Obligations (RPO) likely exceeding $500 billion. On Wall Street, the S&P 500, Nasdaq, and Dow Jones Industrial Average each closed at record highs, supported by artificial intelligence enthusiasm, Fed rate-cut hopes, and the payrolls revision. UnitedHealth also rallied.
In other assets, the U.S. Dollar Index (DXY) bounced from a six-week low to snap a two-day losing streak before easing midweek. USD strength weighed on Gold at record highs, pressured other major currencies and antipodeans, while cryptocurrencies slipped amid mixed industry news and caution ahead of U.S. inflation data. That said, EURUSD retreated from a six-week high, while GBPUSD eased from a month’s peak, and the USDJPY also bounced off a one-month low before paring gains. Further, AUDUSD and NZDUSD reversed from a multi-day high, but stayed firmer despite US Crude Oil’s three-day winning streak.
The U.S. Dollar’s rebound, along with fresh political concerns in France and Japan and rising war fears after Russia attacks Poland, triggered the biggest EURUSD drop in over a week, pulling the pair back from a six-week high before a slight rebound. Similarly, USDJPY fell to a one-month low, recovered briefly, but failed to sustain gains amid weak momentum. Notably, upbeat Japan Reuters Tankan data boosted hawkish Bank of Japan (BoJ) bets, contrasting with dovish Fed expectations, adding pressure on USDJPY.
A firmer U.S. Dollar (USD) and indecision among Bank of England (BoE) officials dragged GBPUSD from a three-week high, ending a two-day winning streak on Tuesday. However, the pullback faded early Wednesday as the USD retreated ahead of U.S. Producer Price Index (PPI) data. The British Pound regained momentum as fears of continued BoE rate cuts eased, supported by upbeat inflation data despite mostly weak jobs and growth figures. Trade and political conditions in the UK look better than in the EU and Japan, but offered little help to Sterling, aside from pressure on the USD from U.S. job fears and expectations of more Fed rate cuts in 2025.
AUDUSD reversed its pullback from a six-week high, while NZDUSD climbs back toward a one-month high, supported by dovish Federal Reserve (Fed) bets and cautious market optimism. Meanwhile, USDCAD edged higher after its biggest daily jump in three weeks, ignoring firmer WTI crude oil as traders focused on the Bank of Canada’s (BoC) dovish bias, ongoing U.S.-Canada trade tensions, and separate China-Canada trade deal talks.
Gold pulled back from the record high near $3,675, posting its first daily loss in three sessions, but recovered early Wednesday as the USD retreated and rising economic, trade, and political uncertainty boosted demand for the safe-haven metal. On the energy front, Crude Oil gained on supply-crunch fears from Russia and the Middle East, despite the third straight surprise build in U.S. weekly inventories against expectations of a draw, according to the American Petroleum Institute (API) survey.
Bitcoin (BTC) and Ethereum (ETH) remained range-bound after a volatile session that first lifted but later dragged the cryptocurrencies. The moves reflected market indecision amid a lack of pro-industry news, U.S. employment and growth concerns, and reports of multiple cyber thefts draining millions in crypto. Even so, institutional buying and supportive technical setups keep BTC and ETH buyers optimistic.
Traders face a busy day as global authorities respond to fresh geopolitical tensions in Doha and Poland, collateral damage from the Russia-Ukraine and Israel-Hamas wars. Focus will also be on the U.S. Producer Price Index (PPI) for August, after weak employment data reinforced expectations of more Federal Reserve (Fed) rate cuts.
Markets will watch Adobe’s earnings, moves in bond yields, and political/trade developments linked to Donald Trump.
Against this backdrop, the U.S. Dollar (USD) is likely to edge higher, pressuring risk assets, potentially triggering a pullback in Gold and limiting cryptocurrencies. EURUSD may extend losses, while GBPUSD could trade mixed amid a quiet UK calendar. USDJPY may stay under pressure on a hawkish Bank of Japan (BoJ) outlook and the JPY’s haven demand.
Elsewhere, AUDUSD, NZDUSD, and USDCAD may remain weak on mixed sentiment and a firmer USD, while Crude Oil could rise further on geopolitical risks to energy supply.
May the trading luck be with you!
