Markets remain cautiously optimistic early Friday, showing typical anxiety ahead of the U.S. Nonfarm Payrolls (NFP) report, but also holding on to hopes of potential interest rate cuts by the Federal Reserve. The cautious optimism is supported by easing concerns about the U.S. economy, relief from Thursday’s economic data, and mixed signals from global trade and politics.
Among key developments, Chicago Federal Reserve President Austan Goolsbee struck a cautious tone, saying the upcoming September meeting of the Federal Open Market Committee (FOMC) is “live” and that he has not yet decided on a rate cut.
This, along with the U.S.-Japan trade deal and President Donald Trump’s optimism about a possible Russia-Ukraine peace agreement, helped maintain a slightly positive market tone—even though Trump’s comments remain unconfirmed and the war continues.
Thursday’s U.S. data signaled that the economy is slowing but not collapsing, aligning with early-week warnings from the Federal Reserve's Beige Book and the Job Openings and Labor Turnover Survey (JOLTS).
The ISM Services Purchasing Managers Index (PMI) for August showed modest growth, which, while not indicating strong demand, supports expectations for further rate cuts. Specifically, the ADP Employment Change for August, a lead indicator for Friday’s NFP, fell sharply to 54,000 from a revised 106,000 in July, below the expected 65,000.
Challenger Job Cuts rose to 85,979 from 62,075 previously, and weekly Initial Jobless Claims increased to 237,000, exceeding both the 230,000 forecast and the prior 229,000. Q2 Unit Labor Costs slowed to 1.0 percent versus 1.6 percent expected and previously, while Nonfarm Productivity rose to 3.3 percent, beating the 2.4 percent estimate.
The U.S. Goods and Services Trade Balance for July widened to a deficit of 78.3 billion dollars, above the expected 75.7 billion and sharply up from June’s 60.2 billion.
The ISM Services PMI rose to 52.0 in August, higher than the 51.0 forecast and July’s 50.1, though the final reading of the S&P Global Composite PMI came in at 54.6, below the initial estimate of 55.4.
Geopolitical developments added complexity to the market mood. President Donald Trump said late Wednesday that he has been in communication with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy about a potential peace deal, stating, “We are going to get it done.” However, there has been no confirmation or positive response from either side, and the war continues, making the comment less convincing.
Separately, Trump announced plans to impose tariffs on foreign semiconductor manufacturers unless they build production facilities in the U.S. He also signed an executive order reducing tariffs on Japanese autos from 27.5 percent to 15 percent.
In addition, the Wall Street Journal reported that the United States is preparing to reopen negotiations on the United States–Mexico–Canada Agreement (USMCA), a process expected to span years and require multiple rounds of Congressional and public approval, reinforcing Trump’s strategy of reshaping global trade to benefit the U.S.
Japan also drew attention after the tariff reduction. Japan’s chief trade negotiator, Akazawa confirmed the signing of a Memorandum of Understanding (MOU) related to Japan’s investment package. The revised U.S. executive order did not mention most-favored-nation status for pharmaceuticals or semiconductors but signaled continued U.S. pressure in those sectors. At the same time, Japan’s latest labor data strengthened expectations of a potential interest rate hike by the Bank of Japan (BoJ).
Japan’s Nominal wages in July rose 4.1% year-on-year, accelerating from June’s revised 3.1% and exceeding the 3% forecast, marking the strongest increase since December. Real cash earnings turned positive for the first time in seven months, rising 0.5% against expectations of a 0.6% decline. The strong wage data, coupled with a weaker U.S. dollar, caused USDJPY to drop. Japanese auto stocks gained following Trump’s executive order that capped U.S. auto tariffs at 15%, lifting investor sentiment.
On Wall Street, the Financial Times reported that OpenAI is working with Broadcom to develop custom artificial intelligence chips by 2026. Strong earnings reports from Broadcom, Copart, and Lululemon boosted investor confidence. The Nasdaq rose 0.98% and the S&P 500 gained 0.83%, both marking their second consecutive day of gains, while the Dow Jones Industrial Average ended a three-day losing streak with a 0.77% increase.
In cryptocurrency markets, the rebound in the U.S. dollar weighed on Bitcoin (BTC) and Ethereum (ETH), while other altcoins showed mixed signals. Bond yields eased slightly, and gold regained upward momentum after pulling back from record highs. Crude oil prices remained under pressure.
In the currency space, the U.S. Dollar Index (DXY) retreated in a typical pre-NFP move, while EURUSD and GBPUSD saw mild gains and USDJPY declined. Further, AUDUSD and NZDUSD recovered the previous day’s losses, while USDCAD ended a four-day winning streak. Equities across the Asia-Pacific region edged higher in response to the day’s developments.
Eurozone Retail Sales released on Thursday came in weaker than expected, adding to downward pressure on EURUSD alongside a stronger U.S. Dollar. Although EURUSD shows a mild recovery early Friday as the USD pauses, the broader sentiment remains under strain. This reflects ongoing economic and geopolitical challenges within the Eurozone, mixed economic data, and the European Central Bank's (ECB) cautious stance—leaning toward a pause in interest rate cuts while highlighting persistent uncertainty across the bloc.
GBPUSD also posts modest gains early Friday, but the pair continues to trend lower, heading for its third consecutive weekly decline. This is despite recent strength in UK Retail Sales. The British Pound remains pressured by broader economic concerns repeatedly cited by Bank of England (BoE) officials, as well as heightened domestic political tensions. The government’s fiscal package has faced criticism, and earlier in the week, UK bond yields spiked to multi-year highs before retreating—adding to fears of a potential recession.
Meanwhile, the U.S.-Japan trade agreement, along with stronger-than-expected real and nominal wage growth and solid household spending data from Japan, has increased expectations of a possible interest rate hike by the Bank of Japan (BoJ). These factors, combined with the Japanese Yen’s safe-haven appeal, have weighed on USDJPY. Even so, the pair remains on track for a second straight week of gains.
AUDUSD and NZDUSD recovered from Thursday’s losses early Friday, bouncing off weekly lows, while USDCAD posted its first daily gain in five sessions. However, all three commodity-linked currencies—the Australian Dollar (AUD), New Zealand Dollar (NZD), and Canadian Dollar (CAD)—remain on track for weekly losses. The Canadian Dollar continues to weaken despite slightly upbeat domestic data and recent optimism from the Bank of Canada (BoC). The currency is pressured by falling Crude Oil prices, Canada’s key export, as well as lingering U.S.-Canada trade tensions and concerns that the BoC may still need to implement further interest rate cuts.
In New Zealand, the Reserve Bank of New Zealand (RBNZ) maintains a dovish policy stance, which continues to weigh on the NZD. Meanwhile, in Australia, recent economic data and remarks from Reserve Bank of Australia (RBA) Governor raised speculation that the central bank may be done with rate cuts—for now—prompting uncertainty over the AUD’s near-term direction.
Although Thursday’s U.S. economic data, a stronger U.S. Dollar, and cautious market optimism, combined with overbought conditions, triggered Gold’s first daily loss in eight sessions, the precious metal resumed its upward trend early Friday. It is once again approaching the all-time high, which was set earlier in the week around $3,578. This brief consolidation in Gold’s price appears to reflect positioning ahead of today’s U.S. Nonfarm Payrolls report, as well as a temporary pause in headlines related to China’s economic stimulus and global bullion demand.
Crude oil prices remain under pressure, hovering near a two-week low after falling for two straight days. The decline is driven by expectations of an output increase from the Organization of the Petroleum Exporting Countries (OPEC) and a larger-than-expected inventory build reported by both the U.S. Energy Information Administration (EIA) and the American Petroleum Institute (API). Additional downside pressure comes from demand concerns linked to ongoing trade and political uncertainty, as well as mixed developments from Russia and Gaza. These factors are challenging oil buyers, especially as President Donald Trump continues to push for increased oil production.
In the cryptocurrency market, both Bitcoin (BTC) and Ethereum (ETH) ended the previous day in negative territory, weighed down by a stronger U.S. Dollar and comments from European Central Bank (ECB) President Christine Lagarde, who took a harsh stance against the crypto market. Japan also signaled plans to introduce strict regulations to protect crypto investors, adding to the cautious tone. Despite this, Bitcoin is still on track for its first weekly gain in four weeks, while Ethereum appears set for a second consecutive weekly loss.
Traders are likely to remain on the sidelines amid elevated anxiety ahead of Friday’s U.S. Nonfarm Payrolls (NFP) report for August, especially following last month’s controversial revisions that added uncertainty to the broader labor market outlook. Current forecasts suggest a slight uptick in the unemployment rate, a modest increase in payrolls, and softer wage growth. If confirmed, this combination could bolster expectations of Federal Reserve interest rate cuts, weighing on the U.S. Dollar. A weaker USD could, in turn, fuel renewed strength in Gold, potentially pushing the metal past its all-time high and toward the $3,600 mark. U.S. equities may also benefit on the back of rising hopes for a more accommodative Fed stance.
Meanwhile, the Canadian employment report, also due Friday, is unlikely to offer significant support to the Canadian Dollar—even if it meets upbeat forecasts—if the U.S. data surprises to the upside and strengthens the USD. Commodity-linked currencies such as the Australian Dollar (AUD), Canadian Dollar (CAD), and New Zealand Dollar (NZD) may continue to struggle for upward traction amid persistent trade tensions and geopolitical uncertainty.
Crude oil prices also remain under pressure and are unlikely to rebound meaningfully—even if the USD weakens—as markets brace for the upcoming OPEC+ meeting this weekend, where an output hike could be announced.
With no major corporate earnings scheduled in the U.S., Wall Street’s direction will largely depend on incoming macroeconomic data, especially the labor market figures. As a result, markets remain on edge, setting the stage for a potentially volatile end to the week driven by economic signals and central bank expectations.
May the trading luck be with you!
