Cryptocurrencies, consisting of coins like Bitcoin, SHIB, ETH, are in an upbeat mood on Thursday ahead of key US jobs data to be released today. Meanwhile, gold continues to move sideways and is about $80 below $1,800. So how will today’s data affect the market? Here are the details…
Gold and crypto markets await US employment data
According to experts, the data could help determine whether the Fed will raise interest rates by 50 or 75 basis points later this month. But Friday’s report was overshadowed by next week’s US CPI report, with inflation the Fed’s main focus. Cryptocurrency markets are in an upbeat mood on Thursday. Most major cryptocurrencies are hitting weekly highs. Bitcoin was last trading just over $21,000. It has increased by about 7 percent in the last 24 hours. Ethereum was last traded close to $1,230. It has approached 7.5 percent in the last 24 hours.
The rise in the US stock markets is helping to boost the sentiment among crypto investors. However, a major breakout is not expected before June in Friday’s US labor market report. This is traditionally seen by investors as one of the most important US economic statements of the month as it is closely watched by the US Fed. Traders generally do not place big bets before major macro events that could trigger bilateral volatility.
What were the latest estimates for the data?
The average expectation is for US nonfarm payrolls (NFP) to rise just under 300,000 in June, according to a survey conducted by Reuters. This marks a slight slowdown in the pace of job gains after NFP approached 400,000 in May. The unemployment rate appears to have remained unchanged at 3.6 percent, roughly in line with pre-pandemic levels. The participation rate is expected to remain around 1 percent below pre-pandemic levels.
How can cryptocurrencies react?
One of the main focuses of the market right now is how fast the Fed will raise interest rates in the next few meetings. Also how much it will eventually raise interest rates in 2023. The central bank has almost admitted that it’s willing to let growth and the labor market suffer if that’s what it takes to get inflation back under control. Given this background, this month’s US Consumer Price Inflation and PCE inflation reports appear to be the most important US data. But that doesn’t mean Friday’s jobs report won’t move markets.
The current narrative around the US labor market is that it is very strong, according to experts. The unemployment rate has been at pre-pandemic levels for some time. Job gains have been solid in recent months. JOLT’s Recruitment for Business earlier this week showed that demand for labor (as of the end of May) remained at historically high levels. It showed that there are far more job postings than the unemployed in the US.
Indeed, the main factor holding the US labor market back in recent quarters has been a shortage of workers, with many leaving the workforce (hence low participation rate) since the pandemic. Lack of demand for workers was not an issue. The strength of the US labor market has given the Fed confidence that the US economy can “handle” the sharp rise in interest rates over the next few quarters. Meanwhile, wage increases that exceeded the central bank’s 2 percent inflation target added to fears that high inflation might be buried.
Cryptos are expected to remain silent
Those narratives remain unchanged if Friday’s business data comes in line with or relatively close to expectations. The market reaction, including crypto, will likely be pretty quiet. For example, if wage growth unexpectedly accelerates in June and other labor market metrics come in stronger than expected, this will reinforce the case for a larger 75 basis points hike later this month. Markets will likely switch to price at a slightly higher rate than the Fed in 2023. This will weigh on the hawk and possibly stocks and crypto.
Alternatively, wage growth has slowed more than expected and other labor market measures are significantly weaker than expected. Say the job number in the header is unexpectedly negative. This could indicate a smaller rate hike of 50 basis points by the Fed later this month. According to experts, it is likely that markets could see the Fed cut its tightening bets for 2023. This dove and will likely boost stocks and crypto.
What’s next for gold?
Gold price (XAU/USD) supports a US dollar pullback from nearly two decades’ highs to extend recovery to $1,750 during Friday’s Asian session. However, gold is currently changing hands around $1,725. Mixed data from the US weighed on DXY. With this, the 4-week moving average count was 232,500, up 750 from the previous week’s average. Also, the US goods and services gap fell by $1.1 billion in May to $85.5 billion, the smallest monthly deficit in 2022.
Gold analyst Anıl Panchal points out that the 50-MHA level of $1.749-1,751 as resistance in gold, when looking at technical data apart from the said data. In addition, $1,774 also appears as resistance. On the support levels, $1,721 remains important.
Next week’s CPI data is important
As noted above, the most important economic data for the US this month will be US inflation pressures. Next week’s June US Consumer Price Inflation report will be scrutinized by investors for any signs that inflationary pressures in the US may have peaked after May’s PCE data suggest so much.
The closeness of next week’s CPI, which will play a key role in the Fed’s thinking at this month’s policy meeting, means investors probably won’t want to draw too much from Friday’s jobs data. If the inflationary pressures drop as expected, crypto bulls are likely to rejoice, according to experts.
