U.S. equity futures remained flat on Friday, while the dollar weakened and Treasury yields dipped after a three-day climb. A renewed strength in the yen is now posing a challenge to the full recovery of risk appetite, which had been shaken by last week’s global market meltdown. This comes on the heels of a more optimistic U.S. jobless claims report, which helped ease fears of a recession sparked by disappointing employment data.
Attention is now shifting to a fresh batch of U.S. economic indicators set to be released next week, including key consumer price data. Investors are also bracing for potentially divergent signals from Federal Reserve officials. Kansas City Fed President Jeffrey Schmid, speaking on Thursday, suggested he is not yet ready to endorse a rate cut, given inflation remains above target. His cautious stance has led swap traders to further reduce bets on aggressive Fed easing in 2024. The global market repricing has been so intense that, at one point, interest-rate swaps implied a 60% probability of an emergency rate cut by the Fed in the coming week—well ahead of its next scheduled meeting in September. Current market pricing now indicates around 40 basis points of cuts expected for September.
Meanwhile, oil prices held steady after a rally on Thursday, amid ongoing tensions in the Middle East. Gold, however, continued its sideway trend. Investors remain on edge, navigating a landscape marked by uncertainty and mixed signals from central banks.