Holiday shortened week, front loaded calendar, and one number that changed the conversation. June NFP moved up to Thursday because of the July 4 holiday, and it landed with a thud: 57,000 jobs against 110,000 expected. The weakest print in four months and gold took notice. The rate market noticed, and after four consecutive down weeks, the metal finally closed one in the green.
US markets are closed today for Independence Day observed, so the week effectively ended Thursday afternoon. Let me break down what actually happened, because there was a lot packed into four sessions.
The Jobs Report: The Miss That Mattered
Thursday morning delivered the June employment report and it was soft everywhere you looked. Payrolls up just 57,000 versus the 110,000 consensus. April and May were revised down by a combined 74,000, which means the labour market has been cooler than we thought for months, not just in June. The unemployment rate ticked down to 4.2 percent, but that came with participation falling to 61.5 percent, so fewer people looking is what is moving the needle, not more people hired. Average hourly earnings ticked up to 3.5 percent annually, right in line with forecasts.
Here is my favourite detail from the report, and anyone who knows me knows why. Leisure and hospitality shed 61,000 jobs, and the BLS pointed to weaker than usual seasonal hiring, likely an effect of the World Cup. The tournament is literally showing up in the payrolls data. The biggest sporting event on earth is distorting American hiring patterns, and somewhere an economist had to write that sentence with a straight face.
The market reaction was immediate and logical. September rate hike odds dropped from roughly two thirds before the report to around fifty percent after it. A coin flip. The July 29 meeting is now priced at under a thirty percent chance of a hike. For a market that spent all of June bracing for three hikes this year, that is a meaningful repricing in a single morning.
Warsh at Sintra: A Different Tune
Kevin Warsh spoke at the ECB Forum in Portugal on Wednesday, the appearance we flagged in Monday’s buildup. And for the first time since taking the chair, the tone shifted. Warsh noted that inflation expectations and risks have come down. That is not a dovish pivot, but from the man who has spent months telling markets that cuts are fantasy and hikes are live, it was enough. Markets read it as the Fed being in no rush to move at the July meeting.
Put Wednesday’s Warsh and Thursday’s NFP together and you get the story of the week: the hawkish case just lost its two best arguments in forty eight hours. A hot labour market and an unflinching chairman. Both softened. The dollar felt it, and gold caught the bid it has been waiting a month for.
Gold: The Streak Is Broken
Four consecutive weekly losses, and then this. Gold defended the $3,960 zone for the third time in recent weeks, and after the jobs report it broke back above $4,100 and held there into the holiday close. The metal finishes the week in positive territory for the first time since late May.
Three tests of a floor without a break is not noise. That is a level the market has decided to defend, at least for now. The bounce came on exactly the catalyst we outlined Monday: a weak jobs number repricing the rate path. In a world where September is a coin flip instead of a near certainty, the yield argument against gold weakens, and the structural bid underneath, central bank accumulation, fiscal worry, long term inflation doubt, gets room to work.
What to watch from here: $4,100 needs to hold as support for this to be more than a relief bounce. Above, the first real test is the $4,225 area, then the bigger zone around $4,300 where the 50 day moving average and old support turned resistance are waiting. Below, $3,960 remains the line. Three defences make it important. A fourth test would make me nervous.
Forex: The Euro Gets Its Window
EUR/USD spent June being rejected at every attempt higher, and last week we said 1.1400 was the cap. The soft jobs data cracked it. The pair climbed to settle around 1.1450, trimming its recent losses as dollar demand cooled on both the NFP miss and the easing Middle East picture. It reached toward the 1.1470 to 1.1480 resistance zone late in the week, where sellers showed up and held the line.
That is the tension heading into next week. The euro finally has a macro tailwind, but it is walking straight into a technical ceiling. A clean break and close above 1.1480 opens the door toward 1.1500 and beyond. Rejection there, and the June low around 1.1324 stays on the table. Neither side has won this argument yet.
Oil and the Iran Clock
The ceasefire is holding and the market is starting to price it as durable. Traffic through the Strait of Hormuz continued to recover all week under the interim agreement, Middle Eastern producers are ramping output and cutting prices, and OPEC+ agreed to raise production quotas for next month. The conversation in the oil market has flipped completely, from scarcity panic in the spring to glut concern in July. WTI is parked in the low seventies and the path of least resistance has been down.
But keep one eye on the calendar. The 14 point MOU signed in June came with a 60 day window to negotiate a final deal, and that clock runs into mid August. Iranian officials have already floated the idea of a transit fee on the Strait once the interim period expires. The peace is real. The pricing of the peace may be ahead of itself. Cheap oil is doing the Fed’s inflation work for it right now, and that linkage, oil down, inflation pressure down, rate fear down, gold up, was the quiet engine of this entire week.
The Week in Summary
NFP at 57,000 with 74,000 in downward revisions. September hike odds cut from two thirds to a coin flip. Warsh is softer at Sintra. Gold snaps a four week losing streak, defends $3,960 a third time, reclaims $4,100. EUR/USD breaks its 1.1400 cap and settles at 1.1450 under a 1.1480 ceiling. Oil soft on recovering Hormuz flows and OPEC+ supply. Equities liked all of it, with the Dow up two percent on the holiday shortened week.
That is the scorecard. The market spent June pricing an immovable Fed, and in two days that certainty cracked. Next week brings the FOMC minutes on Wednesday, and everyone will be reading them for evidence of how divided that committee really is. Enjoy the long weekend if you have one. I will be watching football and pretending it is research.