Potential interest rate hikes in the US continue to play out in the markets, resulting in a decline. Investors did not even look at recent economic data, even though ADP released better-than-expected employment report in the US.
Reportedly, jobs in the private sector increased to 497,000, significantly higher than the expected 228,000. It also surpassed May's data of 267,000, indicating that the US labor market continues to feel quite well.
Markets debated last year how aggressively the Fed would raise rates, believing that a strong labor market would allow the regulator to more actively combat inflation. However, investors now fear that the Fed may decide to maintain its tight monetary policy, which will negatively impact risky assets.
The downward momentum will most likely continue if the Department of Labor reports an employment data that exceeds the forecast of 225,000. But if the figure turns out to be slightly weaker than expected, markets may calm down a bit and begin to recover, as expectations of a rate hike will weaken.
On this wave, the rise in Treasury yields may also pause, while dollar will not change significantly.
Forecasts for today:
USD/CAD
The pair may rise if employment data in the US exceeds expectations. This could lead to a breakout of 1.3380 and a sharp increase to 1.3465.
XAU/USD
The pair may consolidate in the range of 1900.00-1931.10 and find support only in the case of weak employment report in the US. It may rise to 1955.00 next week.