Overview
- US markets ended last week with mixed signals after June non-farm payrolls missed expectations, reinforcing uncertainty around the Federal Reserve’s next policy move.
- Federal Reserve Chair Kevin Warsh maintained a data-dependent stance, offering no indication of whether rates will rise, fall or remain unchanged at the July meeting.
- Traders will closely monitor the FOMC meeting minutes and the Reserve Bank of New Zealand’s interest rate decision for fresh policy clues.
- Gold, the US dollar and equity indices could remain sensitive to incoming macroeconomic data as markets reassess expectations for US interest rates.
Fed Keeps Markets Guessing As Weak Jobs Growth Complicates The Outlook
The Federal Reserve returned to the centre of market attention last week as Chair Kevin Warsh made his first major appearance on the global central banking stage since assuming office in May. Speaking alongside leaders from the European Central Bank, the Bank of England and the Bank of Canada at the ECB Forum in Sintra, investors were looking for a clearer indication of where US monetary policy may be heading.
Instead, policymakers received very little guidance.
Warsh refrained from signalling whether the Federal Reserve is leaning towards another rate increase, a rate cut or an extended pause. His comments reinforced a commitment to responding to incoming economic data rather than shaping market expectations through forward guidance.
Only days later, the release of June’s US non-farm payrolls added another layer of uncertainty.
The US economy created just 57,000 jobs, well below market expectations of around 114,000, suggesting hiring momentum continues to slow. The weaker labour market reduces pressure for further policy tightening, yet inflation remains above the Federal Reserve’s long-term objective, preventing policymakers from confidently shifting towards rate cuts.
The combination leaves monetary policy finely balanced ahead of the July meeting. If you are looking to build consistency during periods of high economic uncertainty, check out our guide on how to build a profitable trading routine.
Inflation Continues To Limit The Fed’s Flexibility
Although labour market conditions have softened, Warsh reiterated that inflation remains the Federal Reserve’s primary concern.
Price stability continues to be the central bank’s mandate, making it difficult for policymakers to signal easier monetary policy while inflation remains elevated. At the same time, slowing employment growth reduces the urgency for additional tightening.
This creates a challenging environment where neither a hawkish nor dovish stance is fully supported by current economic data. To better understand these broader macro environments, read our breakdown of bullish vs bearish markets.
Rather than committing to a specific direction, the Federal Reserve appears willing to wait for additional evidence before making its next policy decision.
For traders, this increases the importance of every major economic release in the weeks ahead, particularly inflation, employment and consumer spending data. Beginners can prepare for this volatile environment by reading how to start trading forex for beginners.
A More Data-Dependent Federal Reserve
Warsh also discussed the growing role artificial intelligence (AI) could play in shaping future economic growth.
Investment linked to AI continues to accelerate as companies increase spending on semiconductor technology, cloud infrastructure, software and data centres. These investments support economic activity today through higher capital expenditure.
The longer-term benefits may emerge through productivity improvements.
If businesses are eventually able to produce more output with fewer resources, productivity gains could help reduce inflationary pressure over time while supporting stronger economic growth.
However, those benefits remain largely prospective.
Current investment demand associated with AI continues to stimulate economic activity, meaning policymakers cannot yet assume technology alone will deliver lower inflation. To track how this space is evolving in the equity markets, review our guide on how to invest in AI stocks and our recent NVIDIA stock analysis.
For now, artificial intelligence remains a structural theme rather than an immediate driver of monetary policy.
Markets Turn Their Attention To The Week Ahead
While last week’s labour market report altered expectations for the Federal Reserve, this week’s calendar offers another opportunity for markets to reassess the policy outlook.
The Reserve Bank of New Zealand is expected to announce its latest interest rate decision on Wednesday, with markets watching closely for any change in guidance surrounding inflation and economic growth.
Attention then shifts to Thursday’s release of the FOMC meeting minutes.
Investors will look for evidence explaining why policymakers voted to leave interest rates unchanged and whether concerns surrounding inflation or slowing employment carried greater weight during discussions.
Although the minutes reflect previous deliberations rather than current thinking, they may still influence expectations ahead of next week’s US inflation data.
With the Federal Reserve maintaining maximum flexibility and economic indicators sending mixed signals, volatility across currencies, precious metals and equity indices may remain elevated as traders respond to each new piece of macroeconomic information. Managing risk during these shifts is essential; remember to review our trade risk management tips to protect your portfolio.
Key Symbols to Watch
USDX | XAUUSD | EURUSD | SP500 | BTCUSD
Upcoming Events
| Date | Currency | Event | Forecast | Previous | Analyst Remarks |
| 6 Jul | USD | ISM Services PMI | 54.2 | 54.5 | A reading above forecast may boost USD sentiment, while a miss could pressure the dollar and support gold. |
| 8 Jul | NZD | Official Cash Rate | 2.50% | 2.25% | Markets expect another 25-basis-point increase as the RBNZ continues to balance inflation and slowing growth. |
| 9 Jul | USD | FOMC Meeting Minutes | – | – | Traders will assess how policymakers viewed inflation risks and labour market weakness ahead of the July meeting. |
| 10 Jul | CAD | Unemployment Rate | 6.60% | 6.60% | Markets will assess whether Canada’s labour market remains resilient, with any surprise likely to influence Bank of Canada policy expectations. |
For a full view of upcoming economic events, check out VT Markets’ Economic Calendar.
Key Movements of The Week
USDX
- The US Dollar Index weakened after June payrolls rose by only 57,000, reducing expectations for further policy tightening.
- Resistance remains near 100.80, while support is located around 100.05.
- Failure to reclaim resistance may encourage further dollar weakness across the major currency pairs.
EURUSD
- EURUSD benefited from broad US dollar weakness following the softer labour market report.
- Buyers may attempt another move towards 1.1510, while pullbacks towards 1.1410 could attract renewed demand.
- Monitor price behaviour around both technical levels before considering continuing trades.
XAUUSD (Gold)
- Gold continued holding above the 4,180 monitored area as weaker US employment data supported safe-haven demand.
- Price could extend towards 4,310 if buyers maintain momentum and expectations for aggressive Fed tightening continue to ease.
- Watch price action around 4,180 first, as this remains the key technical level before any continuation higher.
USOil
- USOil gapped lower after US-Iran peace headlines and broke the 81.92 monitored level.
- If price consolidates below 81.92, the next downside level sits at 76.778.
- Deal durability and the timeline for any Strait of Hormuz reopening should guide the next move more than demand data alone.
SP500
- US equities remained resilient despite slowing employment growth, supported by expectations that policy tightening may be approaching its peak.
- A sustained close above 7,594 could attract additional buying interest.
- Traders should monitor whether incoming Federal Reserve communication supports the current bullish momentum.
BTCUSD
- Bitcoin continued consolidating after sweeping liquidity around the 62,600 region.
- A move above 64,000 may open the path towards 65,150, while a break below 62,300 could expose 60,300.
- Momentum remains highly dependent on overall market risk sentiment and US dollar direction.
Bottom Line
Markets begin the week balancing two competing themes. The US labour market is showing signs of cooling, yet inflation remains elevated enough for the Federal Reserve to maintain a cautious stance. This combination leaves interest rate expectations highly dependent on incoming economic data rather than predetermined policy guidance. The Reserve Bank of New Zealand’s rate decision and the FOMC meeting minutes will be the primary catalysts this week, while traders should continue monitoring gold, the US dollar, major currency pairs and US equity indices for any shift in market sentiment ahead of next week’s US inflation data.
Create a live VT Markets account today to access our platform features, including market insights and educational content.
Frequently Asked Questions
Why is the Fed keeping the markets guessing?
Federal Reserve Chair Kevin Warsh has adopted a data-dependent stance, offering no forward guidance on whether interest rates will rise, fall, or remain unchanged at the July meeting.
How did the June jobs data affect expectations?
US non-farm payrolls missed expectations by a wide margin. While this slower hiring reduces the urgency for more rate hikes, sticky inflation prevents the Fed from shifting quickly toward rate cuts.
What is the Fed’s view on AI?
While massive corporate investment in AI infrastructure is boosting capital expenditure today, the long-term productivity benefits are still prospective. For now, the Fed views AI as a structural theme rather than an immediate driver of monetary policy.
Start trading now – Click here to create your real VT Markets account
