Dollar Slips, Gold Advances as Markets Brace for NFP

The Euro remains broadly steady against the US Dollar, with EUR/USD holding near 1.1550 in Thursday’s European session after rising from last week’s lows. The common currency continues to benefit from stronger Eurozone data and lower Oil prices, while caution ahead of Friday’s US Nonfarm Payrolls report is limiting demand for the Greenback.

German Factory Orders rose 3.1% in June, significantly exceeding the 0.3% market forecast and following a downwardly revised 0.3% increase in May. The data came after an upward revision to Germany’s HCOB Services Purchasing Managers’ Index (PMI) on Wednesday, reinforcing expectations that the European Central Bank (ECB) could raise interest rates in September.

US economic data has offered little support to the Dollar. ADP Employment increased by just 44K in July, well below the 98K gain recorded in June and the 70K expected by economists. Meanwhile, the ISM Services PMI edged up to 54.1 from 54.0 but missed expectations of 54.5, while rising price pressures and weaker employment components pointed to a mixed outlook for the US economy.

Attention now turns to Friday’s Nonfarm Payrolls report, with the weaker ADP reading raising concerns that the official employment figures could also disappoint.

Gold prices remain near a seven-week high after paring earlier gains on Thursday, supported by optimism over a potential agreement to reopen the Strait of Hormuz. Hopes of easing disruptions to global energy supplies have pushed Oil prices lower, reducing inflation concerns and prompting markets to scale back expectations for further Federal Reserve tightening.

Reuters reported that a proposed agreement between Iran and Oman aimed at ending the five-month conflict between Tehran and Washington could give Iran control over vessels entering the Gulf through the Strait of Hormuz. The prospect of a deal has increased expectations that energy supply disruptions could ease, weighing on Oil prices and reducing inflationary pressures.

Markets now price around a 55% probability of a Federal Reserve rate hike in September, down from roughly 67% earlier this week. Lower US Treasury yields and a subdued US Dollar have also supported Gold by reducing the opportunity cost of holding the non-yielding asset.

Attention now turns to Friday’s US Nonfarm Payrolls (NFP) report, the next major catalyst for Gold and broader financial markets. The latest ADP report showed a slowdown in private-sector hiring in July, reinforcing concerns that the official employment figures could also disappoint.

Oil prices extend their decline on Wednesday, adding to sharp losses earlier this week as optimism over a potential agreement to facilitate shipping through the Strait of Hormuz outweighed lingering geopolitical risks and a surprise increase in US crude inventories.

Market sentiment improved after Iran said it had reached an agreement with Oman on the coordinates of a proposed shipping route through the Strait of Hormuz, a key waterway that handles around one-fifth of global Oil and LNG trade. However, the agreement does not represent a full reopening, with negotiations over cargo fees, inspections and broader security arrangements still unresolved.

US President Donald Trump said Wednesday that Washington was holding talks with Tehran, although Iran has publicly denied that peace negotiations are underway. Nevertheless, the prospect of increased tanker traffic through Hormuz has eased concerns over prolonged supply disruptions that had pushed Oil prices sharply higher in recent weeks.

US government data provided another bearish signal, with crude inventories unexpectedly increasing by around 2.5 million barrels last week, compared with expectations for a 1.5 million-barrel drawdown. Stockpiles at the Cushing, Oklahoma delivery hub also rose, pointing to softer near-term demand and adding pressure on Oil prices.

Elsewhere, Houthi attacks on Red Sea shipping, disruptions to Russian and Ukrainian maritime trade and uncertainty surrounding Kazakhstan’s main Oil export route continue to highlight risks to global energy supplies.

Wall Street took a breather on Wednesday after a strong start to August pushed major US indexes back toward record levels. The US 500 and US Tech 100 closed lower, while the US 30 reached a fresh record close, as investors weighed strong corporate earnings, softer US employment data and hopes for progress toward reopening the Strait of Hormuz.

The recent rebound in technology stocks has helped restore confidence in the AI trade after a sharp July selloff. Strong results from Microsoft and Amazon helped revive demand for chipmakers, with the Philadelphia Semiconductor Index rising nearly 15% since Microsoft’s earnings report. However, the latest earnings reaction was more mixed, with SpaceX shares falling 13.8% and AMD dropping 7% despite both companies reporting better-than-expected results.

SpaceX declined after reporting stronger-than-expected revenue and a narrower loss, although elevated spending on AI infrastructure raised concerns over free cash flow. AMD also came under pressure despite beating quarterly estimates and providing upbeat guidance, as investors appeared to expect stronger results following the stock’s substantial gains this year.

With major indexes near record highs, investors now turn to Friday’s US employment report for further clues on the Federal Reserve’s policy outlook and the strength of the economy.