The ADP data on the number of new jobs in the Nonfarm sector of the US economy published on Wednesday weakly increased again, but this fact does not frighten investors yet. Market's attention is focused on the release of official figures from the US Department of Labor tomorrow.

Based on the presented data, the US economy received 374,000 new jobs in August, against the forecasted growth of 600,000. What's even worse is that the previous July figures were revised downwards from 330,000 to 326,000. This was really disappointing, but investors have not yet reacted properly to this news, reasonably believing that the ADP report does not fully reflect the whole picture of the labor market. So, we will only see the complete market reaction to the situation with unemployment and the prospects of the economy tomorrow after the release of the unemployment data of the Ministry of Labor.

How will the markets react to the US Department of Labor report?

Unlike the figures from the ADP, we believe that it will be more optimistic. If the data show a larger than expected number of new jobs of 750,000, it will undoubtedly support the US dollar locally, but it is hardly worth counting on its strong growth since positive news will cause a wave of purchases of risky assets in the hopes that a full recovery of the labor market, and hence the national economy, is not far off. In addition, a surge of positive emotions will support the prices of commodity assets.

Let's also consider another possible scenario that is negative. The values for the number of new jobs in the non-agricultural sector are significantly worse than the consensus forecast. This will also cause a strong reaction of the markets. The US dollar will be under pressure, as the prospects for the probability of an earlier increase in interest rates will diminish. There will be a sell-off in the stock markets, primarily in America. A similar picture will be in the commodity-raw materials market.

Following the first negative reaction, the demand for stocks will start rising again, as the probability of an interest rate hike will be postponed indefinitely. In this case, the securities that flourished during the pandemic, as well as the shares of value, will receive support once again. In turn, the stocks of companies will be under pressure.

If we evaluate the probabilities of these two scenarios, we still believe that the first one is more likely, and so, we are relying on a positive market reaction on Friday.

Forecast of the day:

The spot gold price is trading below the level of 1817.45, extending in a thin line. We still believe that the overall positive data should support gold's price, which will rush to the level of 1830.00 after breaking through the level.

The USD/CAD pair is above the level of 1.2580. The strong US employment data will lead to the breakdown of this level and a decline towards 1.2490.