Tech Rebound Lifts Sentiment as Markets Await NFP

EUR/USD traded around 1.1505 during Tuesday’s early European session as traders remained cautious ahead of the latest US labour market data.

Stronger-than-expected Eurozone inflation has reinforced expectations for further European Central Bank rate hikes. Headline inflation rose to 2.9% year-on-year in July from 2.8% in June, while core inflation accelerated to 2.5% from 2.4%, exceeding expectations.

Markets are now pricing in further ECB tightening, with additional rate hikes fully priced in by October and April, according to Reuters.

Attention now turns to the US JOLTS Job Openings report due later Tuesday, followed by Friday’s July employment report. Economists expect Nonfarm Payrolls to rise by 83,000, while the Unemployment Rate is forecast to increase to 4.3%. Stronger-than-expected employment data could support the US Dollar by reducing expectations for a September rate cut.

Markets are currently pricing a 64.7% probability of a US rate hike in September, down from around 77% before the July Federal Reserve meeting, according to CME FedWatch.

Gold prices remained elevated early on Tuesday, holding just above $4,050 an ounce as markets weighed ongoing Middle East tensions against expectations for a potentially tighter Federal Reserve policy.

Renewed fighting between the US and Iran and concerns over attacks on commercial tankers near Oman have kept geopolitical risks elevated. Meanwhile, a more than 20% rise in Brent crude during July has raised concerns that higher energy prices could add to inflation pressures and keep US interest rates elevated for longer.

Markets are now turning to a busy week of US labour-market data, including the ADP employment report and Friday’s Nonfarm Payrolls release, which could provide further clues on the Federal Reserve’s policy outlook.

Recent hawkish comments from Fed officials who backed a rate hike at last week’s meeting, along with remarks from New York Fed President John Williams that policymakers remain prepared to raise rates if inflation remains elevated, have reinforced expectations for a restrictive policy stance.

Oil prices rose more than 1% on Tuesday after sliding sharply in the previous session, as conflicting signals over potential US-Iran negotiations revived concerns about continued Middle East supply risks.

US President Donald Trump said talks with Iran were underway and described them as Tehran’s “last chance” to reach a deal, while Iran denied that negotiations were currently taking place. The conflicting statements have kept traders cautious and left the outlook for regional tensions uncertain.

The Strait of Hormuz remains a key focus for oil markets, with roughly a fifth of global oil consumption normally passing through the waterway. Any renewed escalation could raise concerns over crude supply disruptions and support prices.

Meanwhile, US crude exports fell to 3.66 million barrels per day in July, their lowest level in eight months, as increased Middle Eastern supply following June’s temporary ceasefire reduced demand for US crude.

US stock index futures edged higher on Monday as markets weighed conflicting signals over potential US-Iran talks and looked ahead to a busy week of corporate earnings and US labour-market data.

Futures followed a strong session on Wall Street, where the US 500, US Tech 100 and US 30 climbed between 1% and 2%. A sharp decline in oil prices after Washington said it had called off a planned attack on Iran helped improve sentiment, while technology and AI stocks recovered from heavy losses in July.

Palantir Technologies was a standout in after-hours trading, surging nearly 14% after reporting stronger-than-expected second-quarter results.

Markets remained cautious over the outlook for US-Iran relations, however, after President Donald Trump said talks with Tehran were underway while Iranian officials denied that negotiations were taking place. Iran confirmed discussions with Oman over the Strait of Hormuz, although traffic through the key waterway remained limited amid elevated military tensions.

Attention now shifts to a busy earnings calendar, with SpaceX set to release its first quarterly results as a listed company on Tuesday. AMD, Caterpillar and Merck are also due to report, while Friday’s US Nonfarm Payrolls report will be closely watched for fresh clues on the strength of the labour market and the Federal Reserve’s interest-rate outlook.