S&P 500 Holds Steady Amid Labor Market Concerns Ahead of Jobs Report | Daily Market Analysis

Key events:

• USA - Average Hourly Earnings (MoM) (May)
• USA - Nonfarm Payrolls (May)
• USA - Unemployment Rate (May)

The S&P 500 paused on Tuesday but remained near record highs as investors assessed signs of a cooling labor market, just a day before the critical monthly US jobs report.

The Dow Jones Industrial Average edged up 0.1%, while the S&P 500 and NASDAQ Composite both dipped 0.1%.

Nvidia (NASDAQ: NVDA) dropped 2% on Thursday, following its milestone of crossing $3 trillion in valuation and surpassing Apple (NASDAQ: AAPL) as the second-largest company on Wall Street, fueled by enthusiasm over its involvement in artificial intelligence. This decline in Nvidia's stock mirrored broader weaknesses in the tech sector, although Meta Platforms Inc. (NASDAQ: META) and Alphabet Inc. Class A (NASDAQ: GOOGL) managed to resist the downward trend.

Gold surged to a two-week high of $2,378 on Thursday after the US Bureau of Labor Statistics reported weaker-than-expected jobs data, keeping US Treasury bond yields steady. The XAU/USD pair is trading at $2,369, reflecting a 0.54% gain after rebounding from weekly lows of $2,320.

The Canadian Dollar remained steady on Thursday as markets awaited key labor data from both the US and Canada. Investors continue to speculate on a potential rate cut from the US Federal Reserve in September, though a postponement to November is still possible.

Canada is set to release its latest wage growth and labor change figures on Friday. However, these reports will likely be overshadowed by the US nonfarm payrolls data. Expectations suggest that the Canadian unemployment rate will rise in May, with new hirings expected to decline. In the US markets have lowered their expectations for net job additions but still anticipate a higher figure.

The USD/CAD pair remains resilient below the 200-hour Simple Moving Average (SMA) but struggles to attract significant buyers during the Asian session on Friday. Spot prices are currently trading with a slight positive bias around the 1.3670 level as traders await the release of the U.S. monthly employment report before making new directional bets.

The Bank of Canada recently cut its benchmark rate for the first time in four years, reducing it from a more than two-decade high and signaling concerns about slowing economic growth. The central bank also noted improvements in underlying inflation, fueling speculation about another rate cut next month. This could limit the upside for the Canadian Dollar and provide support for the USD/CAD pair.

Given this mixed fundamental backdrop, aggressive traders should exercise caution, suggesting that the USD/CAD pair is likely to continue its range-bound movement on the last trading day of the week. Nevertheless, spot prices are on track to post modest weekly gains, remaining within a familiar range since early May.

The Australian Dollar held steady on Friday after gains in the previous session. AUD traders are cautious ahead of a speech by Andrew Hauser, Deputy Governor of the Reserve Bank of Australia, on Australia's economic outlook and the release of China's Trade Balance data later in the day.

The Australian Dollar gained support following a widened Trade Surplus on Thursday. Additionally, a hawkish statement by RBA Governor Michele Bullock on Wednesday reinforced the AUD’s strength and bolstered the AUD/USD pair. Bullock indicated that the central bank is prepared to raise interest rates if the CPI does not return to the target range of 1%-3%, according to NCA NewsWire.

The GBP/USD pair trades positively for the third consecutive day, hovering around 1.2795 during the early Asian session on Friday. With no major UK economic data releases, the pair's movement is influenced by the USD. Market participants are focused on the upcoming US nonfarm payrolls data for May, due later today.

Speculation that the US Federal Reserve will cut interest rates later this year has weighed on the US Dollar and bond yields. The US Dollar Index, which measures the USD against a basket of foreign currencies, has dropped to 104.10, while the US 10-year benchmark yield has edged lower to 4.285%. According to the CME FedWatch tool, the probability of a Fed rate cut in September has increased to about 68%, up from 55% earlier in the week.

On Thursday, the US Department of Labor reported that weekly Initial Jobless Claims for the week ending May 31 rose to 229,000, from a previous reading of 221,000, surpassing the market consensus of 220,000. Investors are now looking towards the US May employment data for further guidance.

The NFP report is expected to show 185,000 job additions in the US economy for May, with the Unemployment Rate projected to remain steady at 3.9%. If the employment data comes in weaker than expected, it could heighten speculation of a Fed rate cut, putting additional pressure on the Greenback.