Markets Extend Gains as Fed Rate-Hike Bets Ease; US NFP Take Centre Stage

Global risk assets extended their recovery on Thursday as investors scaled back expectations for a Federal Reserve interest-rate increase in September. US equities rallied, cryptocurrencies strengthened, and precious metals advanced as Treasury yields retreated and the dollar weakened.

Wall Street rallies after Waller signals support for a pause

Wall Street closed sharply higher after Federal Reserve Governor Christopher Waller said he would support leaving interest rates unchanged at the Fed’s 15–16 September meeting if incoming inflation data confirm price pressures are moderating.

Waller nevertheless kept the door open to further tightening, saying that a renewed acceleration in inflation could justify a rate increase. His comments shifted market expectations: the probability of a September hike fell to approximately 50.4% from 63.2% on Wednesday, according to CME FedWatch data.

Gold and silver advance as Treasury yields retreat

Gold and silver extended their rebound as the benchmark 10-year US Treasury yield declined towards 4.76%. Lower yields reduce the opportunity cost of holding non-interest-bearing assets such as bullion, while the weaker dollar makes dollar-denominated metals less expensive for buyers using other currencies.

Gold traded near $4,500 an ounce on Friday after advancing for two consecutive sessions. Despite the improving tone across risk assets, demand for precious metals remained supported by geopolitical uncertainty and lingering concerns about inflation.

Oil prices were also heading for a strong weekly gain. Renewed hostilities in the Middle East and continued uncertainty surrounding shipping through the Strait of Hormuz maintained a sizeable geopolitical risk premium in crude markets.

Yen jumps as intervention speculation returns

The Japanese yen strengthened by more than 2% against the US dollar on Thursday, with USD/JPY falling to approximately 155.5. The move reflected a combination of broad dollar weakness, growing expectations of additional Bank of Japan policy tightening and speculation that Japanese authorities may have intervened in the foreign-exchange market. The intervention claim had not been officially confirmed at the time of writing. Accordingly, the move should not be attributed definitively to the Bank of Japan.

US employment report could reset rate expectations

Attention now turns to the US employment report for August, due on Friday, 4 September. Economists expect nonfarm payrolls to have increased by approximately 55,000–56,000 after employment declined by 23,000 in July. The unemployment rate is forecast to remain close to 4.1%, while average hourly earnings are expected to rise by around 0.3% month on month.

A weaker-than-expected report could reinforce expectations that the Fed will leave rates unchanged in September, potentially placing further downward pressure on Treasury yields and the dollar. Conversely, unexpectedly strong job creation or wage growth could revive rate-hike expectations and reverse part of Thursday’s risk-asset rally.

 

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