How Markets Could React To U.S. Jobless Data

Its been a very quiet night of trade in the markets with currencies moribund and equities just treading water as the summer holiday season and lack of any fresh newsflow has muted any price action so far.

On the geopolitical front, the tensions between China and the West remained high with China warning Australia that it may take action over Australia’s suspension of the extradition treaty between the two countries in light of the draconian new security law on Hong Kong.

So far the markets have shrugged off any concern over the rise in rhetoric with Aussie barely budging from its New York close level as capital markets continue to ignore the possible economic ramifications of the new political cold war. Still, this is a risk that could quickly get out of control if China and Western economies begin to retaliate against each other by blocking market access.

For today, however, the immediate focus will be on the US unemployment data due 12:30 GMT. Markets continue to look for a decline in weekly jobless claims applications down to 1.3Million from 1.4Million the week prior as the economy continues to come out of the lockdown. However, the recent spike in COVID cases, especially in the Southern part of the country, may have triggered a fresh wave of layoffs so a downside surprise is possible.

If the data prints as expected the bulls will take it as yet another sign of the resiliency of the US economy. If it misses badly it could offer an excuse for a long-overdue correction after the relentless rally of the past few weeks.