The latest non-farm payroll numbers massively exceeded expectations on Friday, as it was revealed that no less than 254 thousand new jobs were added in September. The figures for previous months were also revised to the upside, painting a very strong picture for the US labour market. The data were enough to prompt an immediate shift in sentiment with regards to future rate cut expectations. The possibility of another 50 bps cut in November has now been completely taken off the table, with odds now heavily favouring a mere 25 bps reduction and some even predicting no change at all.

The Dollar saw substantial inflows on Friday, to the detriment of the Yen and the Pound in particular; the DXY climbed over half a percent back up to 102.5. US indices also took the news well, the Nasdaq Composite climbing 1.2%, the S&P 500 gaining 0.9% on the day and the Dow Jones reaching yet another daily record close after finishing 0.8% in the black.

Despite some measure of volatility, gold finished Friday’s session more or less where it started, ending the week at $2,653 an ounce. More interestingly, silver came within a hair’s breadth of $33 before settling for a 0.6% gain on the day. The volatility extended to oil markets, which closed the week higher still following geopolitical pressures in the middle east.

Traders will once again have to wait until later in the week for the economic calendar to get interesting. FOMC minutes on Wednesday should whet a few appetites, following which US jobless claims and CPI data on Thursday should be enough to keep market participants entertained.

Markets subdued; Dollar strong ahead of non-farm payrolls later today. In the absence of much else going on in the latter half of this week, traders and non-traders alike will have their eye on the developing situation in the middle east, which appears to have taken a turn for the worst. The Israeli retaliation against Lebanon and surrounding areas saw central Beirut hit by heavy missile strikes last night. The tensions that had been bubbling away for the past few weeks have now reached the surface and the question on everyone’s mind is how far both sides are willing to go.

The reaction in oil markets was predictable. Brent Crude gained 4% on Thursday, emerging from the pit that had engulfed oil prices for the past month and reclaiming $77 a barrel. Gold showed no interest in acting like a safe haven’t asset this week, remaining remarkably flat over the past couple of sessions and barely moving from $2,650 an ounce. If anything, the greenback seemed the most willing to take up the mantle, enjoying consistent inflows this week. The DXY is up 1.5% so far this week, in no small part thanks to Jerome Powell’s dovish comments on Monday.

The week is not over yet however, the main event of the economic calendar is a mere few hours away. 140 thousand new jobs is the magic number for the September non-farm payrolls, with an employment rate of 4.2%. Yesterday’s initial jobless claims came in marginally higher than expected but nothing earth shattering. Nevertheless, NFPs can always surprise; any major deviation from predictions will have a significant market impact.

The Dollar finally found its footing this week after comments from Federal Reserve Chair Jerome Powell on Monday. During a casual interview, Powell mentioned that there was no rush to push for aggressive rate cuts before the end of the year, instead the central bank would allow the economy to dictate future monetary policy. For some, the robust 50 bps cut a couple of weeks ago was an indication that more large cuts were on the way, but such expectations have now been tempered. According to FedWatch, a 25 bps rate cut is now far more likely than anything more substantial, although markets will have to wait until the 6th of November to find out.

The Dollar Currency Index maintained momentum during yesterday’s session, gaining 0.45% and reclaiming the 101 level. Cable was forced to cede its recent highs and settle back down to $1.33 and the Euro saw lows of $1.105 yesterday. Despite strength in the greenback, gold climbed 1.1% on Tuesday, completely making up for its losses on Monday and finishing the day over $2,660 an ounce.

Oil prices surged yesterday as tensions in the middle east continued to escalate, notably the Iranian missile strike against Israel. Brent Crude gained over 3% to $74 a barrel, although it remains to be seen whether current developments will have any long-term impact on oil. Manufacturing PMI data continue to be a mixed bag, making it hard to justify more optimistic industrial forecasts.

Encouraging signs on the inflation front last Friday: the PCE price index revealed an increase of just 2.2% year-on-year, beating expectations and coming within touching distance of the Fed’s long-held target of 2%. The Dow Jones reacted by establishing yet another all-time high, rising 400 points before settling for a more modest 0.3% gain on the day. Interestingly, the S&P 500 and Nasdaq Composite both closed the day in the red.

An interesting start to the week in the Asian session. Japanese markets are currently reacting to the nomination of a new prime minister, set to take up the mantle tomorrow. Shigeru Ishiba is a former defence minister and is considered to be less investor friendly than his rivals, leaning towards raising rates and strengthening the Yen. The Nikkei 225 index fell over 4% by lunch as investors weigh the consequences of a stronger currency on the Japanese export market.

In China, stocks continued their recent rally this morning, buoyed by the generous stimulus package promised by the PBoC. Starting tomorrow, Chinese markets will remain closed for the upcoming “golden week”, potentially extracting liquidity out of the precious metals markets.

Manufacturing and services PMIs dominate the economic calendar this week, with China already publishing its figures this morning and the rest of the world to follow suit over the next few days. Later today, we may receive more clues as to the Fed’s intentions to enact further rate cuts thanks to a speech from Jerome Powell. Today also marks the end of the third quarter. Finally, Thursday and Friday have the potential to shake things up a bit with the publication of US jobless claims and Non-Farm Payrolls.

Gold simply refuses to stop hitting new highs. Yesterday marked the latest step on the record-breaking path, which saw the precious metal reach highs of $2,685 per ounce on the intra-day. There are a number of bullish arguments for bullion at the moment, as central banks around the world begin to cut interest rates in earnest, with the promise of more to come. Silver also made a bold move on Thursday, stepping up to $32,71 an ounce before settling lower. Traders would have to go all the way back to 2012 to see those same prices.

Another factor is of course the recent stimulus package courtesy of the People’s Bank of China, which is also working wonders for the Hang Seng Index, which surged over 4% yesterday to levels not seen since August of last year.

In the US, the S&P 500 index closed 0.4% higher on Thursday to a new record high of its own. The Dow Jones Industrial Average and Nasdaq Composite also fared well thanks to better-than-expected economic data, both gaining around 0.6% on the day. The record-breaking trend even extended to Europe, where the German DAX also hit an all-time high after climbing 1.7% over yesterday’s session.

The week is not over yet however, later today the PCE price index will attract a decent amount of attention, not least from the Fed itself. If proposals for further rate cuts are to be believed then the latest batch of inflation data will certainly factor into future decisions.

The People’s Bank of China surprised markets with an unusually large stimulus package yesterday. The measures include sizeable injections of capital as well as a reduction in lending rates across the board. The package is the biggest intervention from the central bank since the pandemic and comes in light of disappointing economic data. Among other aspects of the Chinese economy, the measures specifically target the real estate sector, which has weighed heavily on market sentiment over the last few years. The Hang Seng Index has made significant gains recently, surging over 10% in the last two weeks alone. The Renminbi has also strengthened considerably against the Dollar, touching 7.02 this morning.

The promise of extra liquidity no doubt helped the movement in gold yesterday, which saw prices reach a new record high of $2,657 an ounce. The precious metal is now up almost 30% year to date. For once, the bullish action extended to silver, which breached $32 an ounce and is now just under yearly highs.

Potentially busy trading sessions on Thursday and Friday, with the economic calendar beginning to look quite crowded. The Swiss National Bank kicks things off with its interest rate decision tomorrow, followed by a slew of data out of the US, including Q2 GDP, jobless claims and a speech from Fed Chair Jerome Powell. The focus remains on the US on Friday with the publication of the PCE price index. Although the Fed has already clarified its path forward, the index remains an important factor for future monetary steering.