Markets on edge ahead of July jobs report amid Fed hike bets

Global markets adopted a cautious posture on Friday as investors awaited the US July Nonfarm Payrolls report, a release expected to shape expectations for the Federal Reserve's next interest rate decision amid persistent inflation concerns tied to the Iran conflict and elevated oil prices.

Economists polled by Reuters forecast that employers added 80,000 jobs last month, up from 57,000 in June, with the unemployment rate expected to hold steady at 4.2%.news.yahoo+2

Fed Rate Hike Bets in Focus

The payrolls data arrives at a pivotal moment for monetary policy. Fed funds futures traders are pricing in roughly 59% odds of a rate hike at the Federal Reserve's September meeting, according to Reuters. That probability has been bolstered by a Financial Times report citing sources close to Fed Chair Kevin Warsh indicating he is open to a September hike if inflation data warrants it.reuters+1

"We expect the Fed to wait until December before starting a modest tightening cycle," said Kristina Clifton, an economist at Commonwealth Bank of Australia, though she acknowledged the report's influence on near-term positioning.reuters

Market participants had scaled back tightening expectations earlier in the week after an agreement between Iran and Oman to partially reopen the Strait of Hormuz eased energy supply concerns. But those hopes faded Thursday after reports that an Iranian parliamentary committee is reviewing a bill to ban US and Israeli vessels from the strait, sending Brent crude sharply higher.wealthinsights.metrobank+1

Currencies and Commodities Hold Steady

The dollar drifted higher against major peers on Friday, rising to 158.505 yen and strengthening slightly against the euro to $1.1521. Sterling edged 0.1% lower against the dollar to $1.3438, while the NZD/USD pair hovered near its weekly low after disappointing Chinese trade data.globalbankingandfinance+2

US Treasury yields climbed Thursday, with the benchmark 10-year note rising to 4.674% and the 2-year yield reaching 4.252%, reflecting both higher oil prices and hawkish Fed expectations.wealthinsights.metrobank

What the Data Could Mean

Will Compernolle, macro strategist at FHN Financial, suggested that even a weak report may not shift the Fed's calculus. "Even if there is a weak report tomorrow, people will consider it noise for the time being because there are so many other signs of strength and it doesn't seem to be guiding the inflation trajectory or the Fed's policy path," he said.wealthinsights.metrobank

The ADP employment report earlier this week showed just 44,000 private-sector jobs added in July, well below expectations, adding uncertainty ahead of Friday's official figures.investing