Sub-par jobs report, US recession fears send markets lower. Where next?
A big miss from July's Nonfarm Payrolls report sent markets reeling across the board as investors call for rate cuts as soon as possible. Find out which markets have been hit the hardest and where USD could land.
Key Points
- US added only 114,000 jobs in July, missing the expected 175,000 and falling short of the 215,000 average from the last year.
- US unemployment rate rose to 4.3%, the highest level since 2021, indicating a weakening job market.
- The S&P 500 Implied Volatility Index (VIX) spiked to 29.00, the highest in 2024, as the S&P 500 dropped over 2% following July's NFP data.
- Crude oil prices fell sharply from nearly $80 to below $74 per barrel due to economic slowdown fears after the NFP report.
- USD/JPY fell below 150.00 and USD/CHF dropped to 0.8600, indicating significant declines in the US dollar against these currencies.
Nonfarm payrolls signaling weakening US economy
The US economy added just 114,000 jobs in July, significantly missing the analyst expectations of 175,000 and falling short of the average 215,000 added monthly over the past year. Concurrently, the US unemployment rate unexpectedly rose to 4.3%, its highest level since 2021. This data indicates concerning signs of a weakening economy, prompting further scrutiny from economists and investors.
Stock market fear reaches highest level of 2024
The S&P 500 Implied Volatility Index (VIX), often referred to as the market's fear gauge, spiked to 29.00 following the release of July's NFP data. This surge was accompanied by a dramatic decline in the S&P 500, which fell by more than 2%. The heightened volatility reflects intensified investor anxiety regarding economic stability.
Crude oil prices crash below $74.00
Despite recent geopolitical tensions in the Middle East driving crude oil prices higher, fears of an economic slowdown caused recent gains to be erased quickly. Crude oil futures plummeted from nearly $80 per barrel to well under $75 following the release of the NFP report, highlighting the commodity's sensitivity to economic sentiment.
US dollar hits new lows vs JPY, CHF
The US dollar plummeted against both the Japanese yen and the Swiss franc, with USD/JPY falling well below 150.00 for the first time since March, and USD/CHF dropping to 0.8600, its lowest level since February. This decline underscores the broader sell-off in the USD amidst growing economic concerns, and a resurgence for flight-to-quality currencies like JPY and CHF.
Will USD continue to decline?
The US dollar has experienced one of the most bullish periods in recent history over the past few years. However, current economic indicators suggest this could be the beginning of a long-term mean reversion in the forex markets. Alternatively, the USD could recover if US economic data shows improvement in the coming months.
How to trade US dollar
- Open an account to get started, or practice on a demo account
- Choose your forex trading platform
- Open, monitor, and close positions on USD pairs
Trading forex requires an account with a forex provider like tastyfx. Many traders also watch major forex pairs like EUR/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.
You can help develop your forex trading strategies using resources like tastyfx’s YouTube channel. Our curated playlists can help you stay up to date on current markets and understanding key terms. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.
Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.