This week, the policy direction of the Federal Reserve and the upcoming annual non farm payroll data have attracted market attention. The US Bureau of Labor Statistics (BLS) will release a reanalysis of the 2024 Quarterly Census of Employment and Wages (QCEW) data and annual non farm payroll data on Wednesday, August 21, which will serve as important guidance for market trends in the coming months.

Federal Reserve policy outlook: dovish signals emerging

Federal Reserve members Mary Daly and Austan Goolsbee expressed over the weekend their willingness to relax monetary policy in September. Their remarks echo the dovish tone in the upcoming policy meeting minutes, strengthening market expectations for interest rate cuts. At present, the futures market has fully digested the expectation that the Federal Reserve will cut interest rates by 25 basis points in the coming months, and 26% of market participants expect the Fed to cut interest rates by 50 basis points. This expectation largely depends on whether the upcoming employment data shows sufficient signals of market weakness.

However, it is worth noting that Goldman Sachs' latest analysis report suggests that the annual revision of non farm payroll data may lead to a reduction of 600000 to 1 million jobs. Although this data adjustment may raise concerns in the market about the extent of labor market weakness, Goldman Sachs believes that it may overstate the actual situation and calls on the market not to overinterpret this revision.

Federal Reserve Chairman Powell will deliver a speech at Jackson Hole this Friday. This speech may become a key guide for the market, especially against the backdrop of sustained positive inflation data. According to James Knightley, Chief International Economist of Dutch International Group, Powell may emphasize that inflation is moving towards the 2% target, which gives the Federal Reserve confidence to shift to interest rate cuts earlier to support the maximization of the job market. This expectation further drives the market's interest rate cut bets and provides support for the short-term weakening of the US dollar.

The Weakness of the US Dollar and the Strong Performance of Gold

Despite the decline of the US dollar index to the 102 level last week, the US dollar/Japanese yen exchange rate also dropped significantly by 1.0% to 146.20, far from last week's high of 149.40. The euro slightly rose to $1.1030, close to last week's high of $1.1047. Jonas Goltermann, Deputy Chief Market Economist at Capital Economics, stated that the expectation of the Federal Reserve relaxing monetary policy has been widely digested in the market, so the US dollar may continue to be under pressure in the short term, although its further downward space may be limited.

At the same time, the weakening of the US dollar and the decline in the yield of US treasury bond bonds have promoted the stability of gold prices. At present, the price of gold remains around $2500, close to the historical high of $2509.69. The dovish expectations of the Federal Reserve's policies in the market have to some extent reduced demand for the US dollar, which in turn has supported the attractiveness of gold as a safe haven asset.

However, investors still need to be cautious about future risk factors. For example, if the upcoming employment data falls below market expectations, it may lead to further weakening of the US dollar and prompt gold prices to break through their current highs. However, if the employment data is better than expected, it may delay the Federal Reserve's interest rate cut process, thereby providing support for the US dollar and putting some pressure on gold prices.

Goldman Sachs' Market Perspective: Key Impact of Employment Data

This week's market focus is undoubtedly on the upcoming release of non farm payroll data and its revisions. Goldman Sachs analysts pointed out that the revision of the annual non farm payroll data may have a significant impact on market sentiment. Their report emphasizes that due to the lag in quarterly employment and wage census (QCEW) data, the market may see a significant decline of 600000 to 1 million jobs. This data adjustment will affect the market's assessment of the health of the US labor market and further impact the Federal Reserve's policy decisions.

Goldman Sachs economist Jane Hazus pointed out that if the August employment report released on September 6th performs well, Goldman Sachs may further lower the likelihood of a US economic recession next year from the current 20% to 15%. Despite the poor performance of non farm payroll data in July, the improvement in economic data such as retail sales and first-time claims for unemployment benefits in August has injected some optimism into the market.

However, if the employment data is significantly lowered, economists at Goldman Sachs warn that this may prompt the Federal Reserve to take earlier action by cutting interest rates to support the labor market. This will put greater pressure on the US dollar and further support the upward momentum of gold.

International Perspective: Global Central Bank Dynamics

In addition to the policy direction of the Federal Reserve, the actions of other central banks around the world this week are also worth paying attention to. The Swedish central bank is expected to announce a rate cut on Tuesday, and the main debate in the market is whether the rate cut should be 25 basis points or 50 basis points. At the same time, the Japanese Consumer Price Report may reignite discussions about the Bank of Japan raising interest rates, despite market expectations that the bank will maintain its current monetary policy unchanged.

These international factors have injected more uncertainty into the global market and increased the volatility of the US dollar and gold prices. With policy adjustments in other major economies such as Sweden and Japan, global investors will further examine the impact of central bank policy directions on global markets and make corresponding adjustments to the trends of the US dollar and gold.

Pay attention to the market impact of this week's employment data

This week's market analysis undoubtedly revolves around the upcoming release of US employment data and its possible revisions. The dovish signal from the Federal Reserve has set expectations for loose policies in the market, but specific policy actions will still depend on economic data performance in the coming weeks, especially the upcoming non farm payroll report.

In this context, the US dollar may face further downward pressure, while gold is expected to continue maintaining its strong performance. Investors should closely monitor the statements and upcoming data of Federal Reserve officials to adjust their trading strategies in a timely manner and ensure a favorable position in future market fluctuations.