More hawkish Fed weighs on markets ahead of the US job report

The US dollar remained steady on Thursday, following yesterday's gains. Even though safe-haven assets have recently cooled down their rally, investors continue to be cautious about the global economic slowdown following a down day for US futures and Asian equities.

It has been a while since markets seemed okay with the 50bps hike this month, followed by another 50bps hike in June. However, there now appears to be the talk of another 50bps in July after Philadelphia Fed President Patrick Harker stated last night that more moves are possible at a measured pace after that. This came just a day after Powell's comments that the Federal Reserve would not hesitate to tighten rates once clear signs that inflation was under control, adding to concerns about a more aggressive rate increase.

Gold in spotlight

Gold struggled to gain meaningful traction on Thursday, extending its consolidative price move for the third consecutive day. Prices were pressured lower on Thursday morning as the dollar strengthened and an elevated Treasury yield weighed down the yellow metal, driven by the aggressive stance of the US Federal Reserve regarding inflation. However, worries about the global economic slowdown continue to dampen investors' sentiment, which should benefit safe-haven gold in the meantime.

Events of today

As we look ahead to the latest US weekly jobless claims figures, which have started to edge higher again, over 200k in recent weeks, we expect the European markets to open at a sharply lower level due to the weakness in US and Asia markets. After the recent significant miss on the Empire manufacturing survey released earlier this week, the Philadelphia Fed's latest business survey for May will also be closely watched.

US regional reports will be released on existing home sales on Thursday. Housing data is expected to cool as a result of rising mortgage rates. As the US housing data showed on Wednesday, there were 1.819 million permits. Still, the figure declined 3.2% month-over-month in April 2022, adding to concerns about an economic slowdown. Housing starts fell by 0.2% month-on-month to 1.724 million.