Global Markets Shift on Weak U.S. Jobs Data (04 - 08 August 2025)

Gold surged nearly 2% to above $3,360 on Friday after the weak jobs report pushed September rate cut odds to 75%. July saw only 73,000 new jobs, with sharp downward revisions, while PCE inflation remained high. Trump’s new tariff package, which is 10% globally and up to 41% on non-deal countries, added to the uncertainty. Silver rose over 1% to above $37, also supported by rate cut bets and ongoing inflation pressures. WTI crude fell 2.7% to $67.3 amid expectations that OPEC+ may increase output by 548,000 bpd in September. Trump’s new tariffs on imports from Canada and India weighed on sentiment, but threats of 100% sanctions on Russian oil buyers helped limit losses.

The 10-year US Treasury yield fell nearly 20 bps to 4.25%, a three-month low, after weak job data and revised figures raised hopes for two Fed cuts this year. Buyback announcements and new tariffs on multiple countries also added to bond demand. Germany’s 10-year Bund yield slipped to 2.66%, tracking US yields as soft labor data fueled rate cut expectations, despite eurozone inflation slightly above forecast. In the UK, the 10-year gilt yield fell to 4.52%, near a four-week low, as markets anticipated a BoE cut to 4% next week. Japan’s 10-year yield stayed around 1.55% after the BOJ held rates steady for the fourth meeting in a row. A cautious outlook persists amid slowing inflation and trade uncertainty, even as Japan agreed to a 15% tariff deal with the US.

Nonfarm Payrolls (July)

The U.S. economy added just 73,000 nonfarm jobs in July, well below the projected 106,000. Additionally, job figures for May and June were revised downward by a combined 258,000, casting doubt on earlier signs of labor market resilience. This sharp slowdown in employment has led markets to increase the likelihood of a Federal Reserve rate cut in September to 75%. The data highlights weakening labor conditions and raises broader concerns over economic momentum and consumer sentiment.

Unemployment Rate (July)

The unemployment rate increased to 4.2% in July, up slightly from June’s 4.1%, signaling further softening in the labor market. Although the rise appears limited, it gains significance when combined with sluggish job growth. Flat labor force participation and easing hiring demand suggest a broader labor market downturn, giving the Fed more justification for a gradual approach to monetary easing.

Core Personal Consumption Expenditures (Core PCE – June, YoY)

Core PCE inflation registered at 2.8% year-over-year in June, aligning with expectations. As the Federal Reserve’s key inflation metric, its persistence above the 2% target indicates that price pressures remain. Coupled with a weakening labor market, this supports a scenario where the Fed adopts a cautious, data-driven strategy rather than rushing into aggressive rate reductions.

JOLTS Job Openings (June)

Job openings dropped to 7.437 million in June, from 7.712 million in May, falling short of the 7.510 million forecast. The decline reflects diminishing employer demand and points to the growing effect of restrictive monetary policy on hiring activity. It further strengthens the view that labor market momentum is slowing.

Consumer Confidence (July)

The Conference Board’s Consumer Confidence Index rose to 97.2 in July, showing improvement from the previous month. This suggests that, despite emerging signs of labor market weakness, household sentiment remains stable for now. However, continued job losses or rising unemployment could weigh on confidence in the months ahead.

Germany GDP (Q2, QoQ)

Germany’s economy shrank by 0.1% in the second quarter of 2025, matching analyst expectations. The contraction reflects persistent stagnation, with weak industrial performance, declining exports, and subdued consumer activity, which is largely influenced by tight monetary conditions, contributing to the decline. These pressures could prompt the European Central Bank to adopt a more accommodative stance.

Germany CPI (July, MoM)

Consumer prices in Germany rose by 0.3% in July on a monthly basis, consistent with forecasts. The data suggests inflation is stabilizing at more moderate levels, alleviating pressure on the ECB. While this creates space for potential easing, the central bank is expected to proceed gradually and remain cautious.

Eurozone CPI (July, YoY)

Inflation in the Eurozone held steady at 2.0% annually in July, matching both expectations and the ECB’s official target. While this supports the case for holding interest rates unchanged, persistent price pressures, especially in services, mean the ECB is likely to maintain a cautious stance. Market expectations currently suggest a 60% chance of a 25-basis-point cut by December.

ECB Rate Outlook

Recent economic indicators have reinforced expectations that the ECB will not raise rates further. Slowing growth, weakening demand, and labor market stagnation suggest rate cuts are increasingly likely. However, compared to the U.S. Federal Reserve, the ECB is expected to proceed more conservatively and at a slower pace.

Eurozone Manufacturing PMI (July)

While not listed on the calendar, the latest Eurozone Manufacturing PMI remains below the 50 threshold, indicating continued contraction in industrial output. This deepens recession risks and adds pressure on the ECB to consider easing. Still, with inflation concerns lingering, the central bank must balance between supporting growth and maintaining price stability.

Bank of Japan Rate Decision – July 2025

In July, the Bank of Japan unanimously decided to keep its benchmark rate at 0.50%, maintaining the level for the fourth straight meeting. Policymakers acknowledged that core inflation might ease in the short term but projected a rebound later. Amid global uncertainty and the recent 15% tariff pact with the U.S., the BOJ opted for a cautious approach. While no immediate rate hikes are expected, the bank remains open to gradual tightening if inflation accelerates again.