The USD remains stable after a disappointing non-farm payroll report and the dismissal of the BLS commissioner. President Trump is expected to announce new nominees for both the BLS leader and a governor soon, following Adriana Kugler’s resignation. The Bank of England is about to make an interest rate decision, likely cutting rates by 25 basis points. Recent job claims have varied between 250K and 220K, which does not match the US jobs report. Canadian employment data will also be available this Friday.

Recent Market Reports

Recent updates show the CHF CPI is unchanged, with an estimated decline in NZD employment and a small rise in NZD unemployment. The Bank of England will announce its monetary policy, where a rate decrease is anticipated. US stock indices are slightly up after recent declines, with the Dow, S&P, and NASDAQ showing small gains. In the US debt market, yields have shifted after a sharp drop. Specifically, the 2-year and 5-year yields have dipped, while the 10-year and 30-year yields have increased slightly. Several major companies are expected to release earnings reports this week. The firing of the BLS commissioner after last week’s weak jobs report has added considerable uncertainty to the market. We are closely monitoring whether this is just a one-time occurrence or the start of a new pattern. Upcoming ISM Services PMI and unemployment claims will be crucial. With the Fed’s decision on rates in September uncertain, expect volatility to be the dominant theme in the coming weeks. In this environment, traders dealing in derivatives should think about strategies that profit from price fluctuations rather than clear trends. For major currency pairs like EUR/USD and USD/JPY, buying straddles or strangles before Thursday’s US unemployment data might be a smart move. This allows for profit regardless of whether the data turns out to be surprisingly strong or weak, causing significant movement in the dollar.

Market Focus

This week’s Bank of England meeting is significant, as the market is fully expecting a 25-basis-point rate cut to 4.00%. This would mark a notable shift after rates were stable through most of 2024, indicating a move towards a dovish policy from the central bank. We view this as a bearish indicator for the pound, which makes put options on GBP/USD an appealing hedge or speculative opportunity. In the US stock market, today’s slight rebound does not make up for the sharp declines on Friday. With major companies like Caterpillar and Lilly set to report earnings this week, there will likely be high volatility in individual stocks, and any weak guidance could drag broader indices back down. It’s wise to protect long portfolios by buying put options on the S&P 500. The bond market is indicating an expectation of Federal Reserve rate cuts, as shown by the 2-year yield dropping to 3.69%. Recent jobless claims data, fluctuating between 220K and 250K, supports the idea of a slowing labor market. This situation contrasts with the Fed’s previously hawkish approach through late 2024, when strong labor data was common. The disappointing New Zealand employment data raises concerns about a slowing global economy. We will also pay attention to the Canadian employment report on Friday. A significantly lower result than the previous gain of 83.1K could suggest a slowing trend, likely pushing the USD/CAD pair higher. Create your live VT Markets account and start trading now.

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