US CPI Takes Centre Stage After Weak NFP Shifts Fed Bets

Key Takeaways

• US payrolls fell by 23,000 in July, while the unemployment rate declined to 4.1% as labour-force participation slipped to 61.4%.
• The weaker jobs report reduced expectations for a September Fed rate hike, shifting market attention towards US inflation.
• A softer CPI reading could reinforce expectations for a Fed pause, while a stronger result could support the Dollar and weigh on Gold.
• USDX, Gold, EURUSD, GBPUSD, the S&P 500 and Bitcoin are entering the week at key technical levels.
• US CPI on 12 August is the main catalyst, with PPI and other economic data also likely to influence market positioning.

July payrolls unexpectedly declined, while previous figures were revised lower. Although the unemployment rate fell to 4.1%, the drop in labour-force participation points to a softer employment backdrop.

With rate-hike expectations already easing, Wednesday’s CPI report could become the next major catalyst for the Dollar, Gold and broader risk assets.

Why Traders Are Watching the Fed

The jobs report has shifted the balance of expectations ahead of the September Fed meeting.

A softer inflation reading could strengthen the case for keeping rates unchanged, while renewed price pressures could bring rate-hike expectations back into focus.

Key factors this week include:

• US CPI: The main test of whether inflation is continuing to moderate.
• US PPI: Further evidence of underlying price pressures.
• Fed Rate Expectations: Changes in September policy pricing could affect multiple asset classes.
• Treasury Yields: Movements in yields could influence the Dollar, Gold and equities.

Key Movements of the Week

USDX

USDX remains under pressure following the weaker NFP report.

• 99.60 and 100.20 are key levels on a potential recovery.
• A break lower could bring 98.95 and 98.70 into focus.

EURUSD

EURUSD is holding around 1.1585 as the softer US labour data weighs on the Dollar.

• A move below 1.1585 could expose 1.1525.
• A sustained recovery could target 1.1600 and 1.1635.

XAUUSD

Gold is trading around $4,360 as markets reassess the Fed outlook.

• A break above $4,383 could open the way towards $4,455.
• A deeper pullback could bring $4,270 into focus.

S&P 500

The S&P 500 remains in a relatively shallow consolidation phase.

• 7,550 is the key area to monitor for potential bullish price action.
• A stronger inflation reading could increase volatility around current highs.

BTCUSD

Bitcoin is trading around 64,550 as rate expectations continue to influence risk sentiment.

• A move higher could target 65,401 and 65,736.
• A break below 64,147 could increase downside risk.

Bottom Line

The weaker NFP report has shifted attention from the labour market towards inflation as markets reassess the Fed’s September policy path.

US CPI on 12 August is the key catalyst. A softer reading could extend Dollar weakness and support Gold and equities, while stronger inflation could revive rate-hike expectations and strengthen the Dollar.

Traders should monitor the key technical levels outlined above as this week’s data reshapes market positioning.

For a deeper look at the week’s economic catalysts and market outlook, read this article.