A holiday-shortened trading week saw significant market moves after two major catalysts: dovish signals from Fed Chair Kevin Warsh at the Sintra forum and a much weaker-than-expected US Nonfarm Payrolls (NFP) report for June. Warsh stated that inflation risks had come down and declined to commit to a specific rate path, which softened the hawkish tone from June and lowered expectations for further tightening by the Federal Reserve [1][2].
The US jobs report, released a day early due to the Independence Day holiday, showed a sharp miss: only 57,000 jobs were added versus expectations of 110,000. The unemployment rate edged lower, but this was attributed to a drop in the participation rate to 61.5, the lowest since March 2021 [2]. This data led to a rapid repricing in rate expectations, with the swaps market now assigning just a 46% chance of a Fed rate hike by year-end [2]. According to the CME FedWatch Tool, the probability of a September rate hike fell to 53% from 63% pre-NFP, while December hike odds remain high at 76% [3].
The US Dollar Index (DXY) dropped, ending the week with a 0.52% loss and trading around 100.83-100.84 [2][3]. The weak dollar fueled a surge in gold prices, with XAU/USD rising more than 1% on Friday to $4,174, after touching lows of $4,121 and approaching the $4,200 level [2]. Gold's rally was further supported by steady US 10-year Treasury yields at 4.485% and renewed central bank buying, with official gold reserves rising by a net 41 tons in May [2]. Technical analysis suggests gold remains short-term bullish but still below the 200-day SMA at $4,402 [2].
Equity markets responded positively, with the S&P 500 closing one of its strongest quarters in six years, reflecting robust risk appetite despite macroeconomic uncertainties [1]. Bitcoin also rebounded from earlier losses to finish the week in positive territory [1]. Meanwhile, oil prices continued to decline as the US-Iran ceasefire held, reducing the war premium and easing energy-driven inflation risks [1][3].
In currency markets, the Swiss Franc (CHF) was set for its first weekly gain in five weeks as the USD/CHF pair fell to 0.8034 after touching an intraday low of 0.8010, before stabilizing as traders reassessed the Fed's outlook [3]. The Swiss National Bank is expected to maintain its current policy stance with rates at 0%, while remaining vigilant against excessive CHF strength [3].
Looking ahead, traders are focused on upcoming US data releases, including the ISM Services PMI, Initial Jobless Claims, and the June CPI report, which are expected to provide further clarity on the Fed's policy path [2][3].
CONCLUSION
Markets reacted strongly to dovish Fed signals and a disappointing US jobs report, driving gold toward $4,200, weakening the dollar, and boosting equities. Rate hike expectations have been scaled back, but upcoming US economic data will be closely watched for further direction. The overall sentiment is positive for risk assets and gold, while the dollar faces continued pressure.