Gold extended its gains on Friday after holding above the bearish channel’s middle line on the four-hour chart. The yellow metal is currently looking to hold above the daily pivot point at $4,143, targeting resistance levels at $4,220 then $4,269. On the downside, if the price fails to maintain trading above the aforementioned pivot point, it may retreat toward support levels near $4,083 then $4,033.

Gold extended its gains on Friday as weaker-than-expected U.S. labor market data prompted investors to reduce expectations for further Federal Reserve interest rate hikes, putting the U.S. dollar on track for a weekly decline. Meanwhile, oil prices edged higher on cautious optimism over ongoing peace efforts in the Middle East, while investors continued to monitor economic data and geopolitical developments for further direction across global markets.

Market Watch

Markets cut Fed hike odds as labour market cools

Financial markets have reduced expectations that the U.S. Federal Reserve will raise interest rates at its next policy meeting after the latest labor market data pointed to a noticeable slowdown in hiring, reinforcing investors’ expectations that the central bank is likely to keep monetary policy unchanged in the near term.

According to data released by the U.S. Department of Labor, the economy added just 57,000 jobs in June, well below analysts’ expectations, while May’s payroll figures were revised lower. Although the unemployment rate declined to 4.2%, the weaker-than-expected job growth signaled a cooling labor market, easing pressure on the Federal Reserve to continue tightening monetary policy.

Following the release of the data, traders significantly reduced the probability of an interest rate hike at the Fed’s July meeting, with futures markets pricing the chances at below 20%, down from higher levels before the employment report. Expectations for additional rate increases later this year also declined, although investors continue to believe that future policy decisions will depend on incoming inflation and economic data.

Meanwhile, San Francisco Federal Reserve President Mary Daly said monetary policy remains “slightly restrictive” but emphasized that the central bank will continue to rely on incoming economic data before making any further decisions on interest rates, citing ongoing uncertainty surrounding inflation and economic growth.

The latest developments boosted investor risk appetite, with U.S. equities advancing and Treasury yields declining as markets increasingly expect the Federal Reserve to delay further policy tightening. Investors are now turning their attention to upcoming U.S. inflation data, which is expected to provide clearer guidance on the future path of monetary policy.

Dollar heads for weekly drop

The U.S. Dollar Index is on track to post its first weekly decline in nearly three months after weaker-than-expected U.S. employment data prompted investors to scale back expectations for further Federal Reserve interest rate hikes, weighing on the greenback against a basket of major currencies.

The Dollar Index, which measures the U.S. currency against six major peers, slipped to around 100.77 during Friday’s trading after falling approximately 0.5% in the previous session. The index is now on course for a weekly loss of about 0.6%, its largest decline since early April. The move followed the release of the June employment report, which showed that the U.S. economy added just 57,000 jobs, well below market expectations of around 110,000, while payroll figures for the previous two months were revised lower.

The softer labor market data pushed U.S. Treasury yields lower and led traders to reduce expectations of a Federal Reserve rate hike at its September meeting. The weaker dollar provided support for rival currencies, with the euro climbing toward a two-week high, the British pound recording its strongest weekly performance in nearly three months, and both the Australian and New Zealand dollars posting notable gains.

Meanwhile, the Japanese yen stabilized after a period of sharp volatility as investors continued to monitor the possibility of intervention by Japanese authorities to support the currency, which recently traded near its weakest level against the dollar in nearly four decades.

Analysts believe the dollar’s direction in the coming weeks will remain closely tied to incoming U.S. economic data, particularly inflation and consumer spending figures, which are expected to provide further guidance on whether the Federal Reserve will continue tightening monetary policy or leave interest rates unchanged for the remainder of the year.

Oil up slightly as peace efforts hold

Oil prices posted modest gains on Friday as investors remained cautiously optimistic about ongoing peace efforts in the Middle East between the United States and Iran. However, expectations of increased crude supplies limited further gains ahead of the long U.S. holiday weekend.

Brent crude futures rose about 0.2% to trade near $72.10 per barrel, while U.S. West Texas Intermediate (WTI) crude climbed to around $68.83 per barrel. The gains followed sharp declines in the previous session, when both benchmarks fell to their lowest levels since before the U.S.-Iran conflict escalated in late February, reflecting easing concerns over supply disruptions.

The market was supported by hopes that diplomatic efforts aimed at maintaining the ceasefire would continue to make progress, although investors remained cautious about the durability of the agreement. Analysts noted that traders are waiting for stronger signs of lasting stability before increasing their bullish positions in the oil market.

At the same time, expectations of higher supplies from the Gulf region capped oil’s upside. Shipping activity through the Strait of Hormuz has gradually resumed, while Kuwait significantly increased its oil production in June and Saudi Arabia boosted crude exports to Asian markets, improving expectations for global supply in the coming months.

Analysts believe oil prices will continue to be driven by geopolitical developments in the Middle East, as well as decisions by major producers and the outlook for global demand. The gradual recovery in crude supplies and the easing of the geopolitical risk premium are expected to keep price gains relatively limited unless new supply disruptions emerge.