Markets hold gains ahead of NFP on softer US-China trade tone
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Risk sentiment improved in the Asian session Friday, as investors welcomed more constructive messaging from Beijing on the trade front. China’s Commerce Ministry stated it is “evaluating” overtures from the U.S. and acknowledged Washington’s repeated interest in re-engaging on tariffs. This marks the clearest sign yet that diplomatic backchannels may be opening again, offering markets some relief after weeks of uncertainty triggered by aggressive trade measures.
U.S. officials echoed this optimism. Treasury Secretary Scott Bessent and White House adviser Kevin Hassett both confirmed that informal talks are underway, while Beijing’s recent move to cut duties on select U.S. imports was interpreted as a positive signal. Still, markets remain cautious, with the focus now firmly on today's U.S. non-farm payrolls report.
In the FX space, directionality is limited. The yen continues to weaken amid dovish rhetoric from the Bank of Japan, which downgraded its growth forecasts and reiterated a cautious stance. Commodity currencies like the Australian and Canadian dollars are firming, benefiting from rising risk appetite, while the euro and kiwi remain under slight pressure. The dollar is steady but lacks momentum ahead of key labor market data.
The anticipated U.S. jobs report will serve as the week’s primary catalyst. Following a surprisingly weak ADP print and rising jobless claims, downside risks to today’s numbers have increased. Markets expect 130,000 jobs added in April, down from March’s 228,000, with the unemployment rate expected to hold at 4.2% and wage growth seen at 0.3% month-over-month.
A material downside surprise could revive recession fears and increase pressure on the Federal Reserve to pivot back toward monetary easing in the June FOMC meeting.
Recent data already suggests economic cooling. First-quarter GDP showed an unexpected contraction, ISM manufacturing employment remained in contraction territory at 46.2, and initial claims jumped to 241,000 last week. These developments have pushed market participants to reassess the resilience of the labor market and the likely trajectory of Fed policy.
In equities, optimism held firm across the Asia-Pacific region. Japan’s Nikkei gained 1.18%, Hong Kong’s Hang Seng rose 1.72%, and Singapore’s Strait Times added 0.36%. China’s mainland markets remain closed for the Labor Day holiday. U.S. markets closed higher overnight, with the Nasdaq leading gains at 1.52%, supported by strong earnings from Microsoft and Meta. The S&P 500 rose 0.63%, while the Dow added 0.21%.
In commodities, gold rebounded to $3,252.11 per ounce, but remains on track for its weakest weekly close since late February. Oil markets firmed as well, with Brent and WTI gaining 0.66% and 0.7%, respectively, buoyed by renewed risk appetite and geopolitical tensions surrounding Iran.
Elsewhere, Australian retail sales rose 0.3% in March, slightly below expectations. However, inflation-adjusted volumes were flat in Q1, suggesting a lack of follow-through in household spending after strong year-end promotional activity. This supports a cautious outlook on the domestic demand side of the Australian economy.
Looking ahead, the Eurozone CPI flash estimate and unemployment rate will provide the next European data point before the U.S. payrolls release dominates the afternoon session. Today’s figures could be pivotal—not just for dollar direction, but for the broader risk narrative that has become increasingly reliant on Fed patience and trade détente.
For traders, positioning remains highly sensitive to U.S. data risk, with potential for sharp volatility in EUR/USD, AUD/USD, and USD/CAD depending on the NFP outcome. A disappointment may strengthen the case for dollar softness, particularly if equity markets retrace from recent highs.
U.S. officials echoed this optimism. Treasury Secretary Scott Bessent and White House adviser Kevin Hassett both confirmed that informal talks are underway, while Beijing’s recent move to cut duties on select U.S. imports was interpreted as a positive signal. Still, markets remain cautious, with the focus now firmly on today's U.S. non-farm payrolls report.
In the FX space, directionality is limited. The yen continues to weaken amid dovish rhetoric from the Bank of Japan, which downgraded its growth forecasts and reiterated a cautious stance. Commodity currencies like the Australian and Canadian dollars are firming, benefiting from rising risk appetite, while the euro and kiwi remain under slight pressure. The dollar is steady but lacks momentum ahead of key labor market data.
The anticipated U.S. jobs report will serve as the week’s primary catalyst. Following a surprisingly weak ADP print and rising jobless claims, downside risks to today’s numbers have increased. Markets expect 130,000 jobs added in April, down from March’s 228,000, with the unemployment rate expected to hold at 4.2% and wage growth seen at 0.3% month-over-month.
A material downside surprise could revive recession fears and increase pressure on the Federal Reserve to pivot back toward monetary easing in the June FOMC meeting.
Recent data already suggests economic cooling. First-quarter GDP showed an unexpected contraction, ISM manufacturing employment remained in contraction territory at 46.2, and initial claims jumped to 241,000 last week. These developments have pushed market participants to reassess the resilience of the labor market and the likely trajectory of Fed policy.
In equities, optimism held firm across the Asia-Pacific region. Japan’s Nikkei gained 1.18%, Hong Kong’s Hang Seng rose 1.72%, and Singapore’s Strait Times added 0.36%. China’s mainland markets remain closed for the Labor Day holiday. U.S. markets closed higher overnight, with the Nasdaq leading gains at 1.52%, supported by strong earnings from Microsoft and Meta. The S&P 500 rose 0.63%, while the Dow added 0.21%.
In commodities, gold rebounded to $3,252.11 per ounce, but remains on track for its weakest weekly close since late February. Oil markets firmed as well, with Brent and WTI gaining 0.66% and 0.7%, respectively, buoyed by renewed risk appetite and geopolitical tensions surrounding Iran.
Elsewhere, Australian retail sales rose 0.3% in March, slightly below expectations. However, inflation-adjusted volumes were flat in Q1, suggesting a lack of follow-through in household spending after strong year-end promotional activity. This supports a cautious outlook on the domestic demand side of the Australian economy.
Looking ahead, the Eurozone CPI flash estimate and unemployment rate will provide the next European data point before the U.S. payrolls release dominates the afternoon session. Today’s figures could be pivotal—not just for dollar direction, but for the broader risk narrative that has become increasingly reliant on Fed patience and trade détente.
For traders, positioning remains highly sensitive to U.S. data risk, with potential for sharp volatility in EUR/USD, AUD/USD, and USD/CAD depending on the NFP outcome. A disappointment may strengthen the case for dollar softness, particularly if equity markets retrace from recent highs.