US data highlights weakness in economy

By Craig Erlam  

The recovery in equity markets stalled on Wednesday as traders eyed the big economic releases in the week.

The ADP and revised GDP numbers may attract some attention, but they were never likely to have too great an impact. The ADP report has long been ignored as a reliable precursor to the NFP report on Friday and at times it’s frankly been wildly off.

That it’s come in at a reasonable 177,000 doesn’t offer any real insight in terms of Friday’s payrolls, with the focus instead remaining on them in relation to Tuesday’s JOLTS data which saw a marked decline. If we see a trend of weaker hiring and fewer job openings, then the Federal Reserve will be more at ease ending the tightening cycle.

Wednesday’s data was never likely to be overly impactful with Thursday’s inflation, income, and spending figures, prior to Friday’s payrolls, always the primary focus. That could well set the tone for September, ahead of some major central bank meetings.

Oil in the middle of recent range

Oil prices continue to trade in the middle of their recent range.

Earlier gains were short-lived, with crude giving them back to trade slightly lower.

Very little has changed as far as oil is concerned, supply remains restricted and the market tight. How economies manage high-interest rates will determine the next move over the remainder of the year.

Gold pares gains

Gold is paring gains but remains positive.

The data this week has been very favourable pointing to weaker job availability and gains and softer economic growth. It’s no game-changer but it’s helpful.

The yellow metal is seeing resistance around $1,950, which could prove a big test coming around a few key technical levels, including the 61.8% Fibonacci retracement of the July highs to August lows.

 

Craig Erlam is Senior Market Analyst, UK & EMEA at OANDA

Opinions are the author’s, not necessarily that of OANDA Global Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.