The non-farm payroll report that was issued on Friday offered strong evidence of a robust economic activity in the United States, which simultaneously adds to inflationary pressures.
Contrary to the consensus forecast of 58,000 jobs, the US payroll growth experienced a sharp increase, rising from a revised figure of 21,000 to 162,000, thereby elevating the three-month average from 38,000 to 71,000.
The unemployment rate remained stable at 4.1 percent, with upward revisions applied to the employment figures for June and July, now standing at 55,000.
Despite these positive job statistics, their influence on the financial markets appears limited, as the probability of an interest rate hike has risen to nearly 60 percent.
As a result, the upcoming consumer price index (CPI) report this week is anticipated to provide more critical insights regarding potential shifts in interest rate policy. The US dollar exhibited only modest gains in response, accompanied by a slight increase in the yields of two-year and ten-year Treasury bonds, which was not enough to notably disrupt the market.
Additionally, the latest economic data from the US is not the only factor influencing inflation considerations in relation to interest rate strategies.
The persistent rise in oil prices, driven by the ongoing US-Iran conflict, presents alarming implications for energy supply stability.
Reports suggest that there is a decrease in oil shipments from US strategic reserves, heightening worries.
Moreover, the US national debt has surged past $40 trillion, while tariffs remain an unresolved issue, collectively exerting additional pressure on US inflation.
Such conditions imply that a softer CPI reading may aid the Federal Reserve in maintaining its current interest rate stance. While, the European Central Bank (ECB) is scheduled to convene on Thursday for its monetary policy meeting. Given the hawkish rhetoric from their July meeting and the escalating energy prices, a 25 basis points increase in the ECB’s deposit rate to 2.50 percent -2.65 percent is anticipated.
The Eurozone remains particularly susceptible to fluctuations in oil and gas prices. Although increasing oil prices impose considerable pressure, the historic lows in gas availability pose an even greater challenge.
Additionally, reports suggest that the El Nino phenomenon is contributing to escalating food inflation, thereby intensifying overall inflationary pressures.
The continual rise in oil prices, driven by geopolitical tensions in the Middle East and increasing supply premiums, is a cause for concern.
Elevated oil prices may benefit oil-producing nations that manage to export crude effectively, yet they create significant burdens for oil-importing countries due to escalated energy expenditures.
Although the US has increased its share of crude oil exports, this development provides little relief to US consumers at the pump and inflicts severe economic strain on European and Japanese economies. Developing nations are similarly adversely affected by the escalating costs associated with oil imports.
Moreover, interruptions in traffic through the Strait of Hormuz and continuous attacks on Russian refining plants are intensifying concerns about supply.
Last week, Brent crude experienced a gain exceeding 8 percent, while US inventories reportedly declined by 4.5 million barrels.
This pattern indicates that increasing oil prices not only intensify inflationary pressures, but also elevate the risk of economic stagnation.
If these circumstances persist without resolution, it is plausible that oil prices will gradually ascend toward the target of $100 per barrel and beyond.
Meanwhile, spot gold exhibited notable volatility last week, plummeting to $4365 before rebounding to test the weekly high of $4511, only to decline again following the announcement of robust non-farm payroll data.
The job numbers have dampened the previously enthusiastic mood, which anticipated potential gains beyond $4750 in the near term.
The prevailing geopolitical climate and economic conditions remain unfavourable for gold to maintain a consistently upward trajectory. The interplay of rising oil prices and the demand for USD is expected to create continued distractions for gold price fluctuations, resulting in sustained market volatility. Thus, I am considering both the potential for gold prices to dip below $4200 and the possibility of rising above $4,800, with movements contingent upon fundamental economic factors rather than market speculation.
WEEKLY OUTLOOK - Sept 7-11
#GOLD @ $4430- A turbulent week lies ahead for gold, with trading anticipated to occur in broad ranges. Initially, gold may find it challenging to rise above $4498 towards $4550. Conversely, on the downside if it breaches the support level of $4340, the likelihood of testing $4250 will increase.
#EURO @ 1.1614- It could receive support near 1.1540, but will likely face challenges in reaching 1.1710 until the ECB announces its monetary policy.
#GBP @ 1.3516- The Pound Sterling is expected to fluctuate within a narrower range. It has support levels at 1.3420 and 1.3370, while resistance can be found at 1.3618 on the upside.
#JPY @ 156.25- Volatility will remain a significant factor. The $/Yen pair currently has support at 154.50. If it holds steady, we may witness a rise toward 157.20. A break above this level could lead to 158.10. However, if the support level is breached, it could lead to a decline toward 153.20.
Copyright Business Recorder, 2026
The writer is former Country Treasurer of Chase Manhattan Bank. The views expressed in this article are not necessarily those of the newspaper
He tweets @asadcmka