By the publication of updated data on employment in the US, the US economy came with clear and fairly clear signals of the risk of a new economic downturn (recession) before the end of this year.
Over the past two months, the US economy has begun to "confidently" demonstrate a decline in production and business activity, which, in the wake of a slowdown in economic growth of 2.0% and a slowdown in the growth of new jobs, indicates a high probability of failure in the recession.
The economic data coming in over the past two weeks has been steadily demonstrating this, confirming these concerns. As we indicated earlier, production indicators have already "fallen" below the Rubicon level of 50 points, which indicates a lack of growth in the manufacturing sector. On Thursday, ISM non-manufacturing sector activity index (PMI) was presented. Although it has decreased, it still balances above the 50 point level, and at the same time, we note that the decline turned out to be significant.
According to the data presented, the index of business activity in the non-manufacturing sector (PMI) from the ISM Institute for Supply Management in September declined to 52.6 points from 56.4 points, while a decline to 55.0 points was expected. Moreover, the indicator stayed above the "red line", but this does not guarantee that it will cross it in October.
On Thursday, in anticipation of the release of important data from the US labor market, a noticeable closure of short positions was observed both in the US stock market and in the foreign exchange market, where the dollar has come under pressure in recent days due to a surge in demand for protective assets, including safe haven currencies. This is caused by the desire to take a wait-and-see position before the publication of employment values, which, by their dynamics, can either push the Fed to more active actions aimed at further lowering interest rates and at the beginning of QE4, or continue to monitor the situation on the markets.
According to the forecast, it is estimated that the US economy received 140,000 new jobs in September compared to 130,000 in August. It is also expected that the unemployment rate will remain at 3.7%.
How can the market react to certain data? It seems to us that if the value of the number of new jobs is lower than expected, for example, 130,000 or even lower, this will lead to a resumption of a fall in the US stock market, weakening the dollar against the safe haven currencies - the yen and the Swiss franc. Gold will also receive support. However, in our opinion, this decline will be local in nature, since the Fed, if not at the October meeting, will be forced to lower rates and start QE4 or something like that. If the data, on the contrary, turn out to be positive, above expectations, this will lead to a limited increase in risk demand and a stronger dollar. But again, this dynamics is likely to be local in time.
Forecast of the day:
Spot gold is consolidating above the level of 1505.50 in anticipation of the publication of updated US employment data. If they turn out to be worse than the forecast, gold, breaking the level of 1505.50, will rush to 1523.00. Conversely, positive values will lead to a local fall in prices to 1491.60.
Meanwhile, USD/JPY will behave the same as gold. On the positive, it can grow to 107.60, but on the negative, on the contrary, it can break the level of 106.70 and rush to 106.20.
