US Treasury yields drop on soft NFP, Hormuz hopes ease Fed risks
US Treasury yields drop across the curve on Friday amid growing speculation that the Iran-Oman deal is about to be sealed, which has so far pushed energy prices lower, while investors also digest a weak Nonfarm Payrolls report in the US.
US Treasury yields decreased across the curve on Friday, as speculation grew about the imminent Iran-Oman deal in Hormuz. This deal could lower energy prices, while investors absorbed a weak Nonfarm Payrolls report from the US. A US official disclosed progress in the talks, stating that once a deal is announced, the US Navy would lift the blockade of Iranian ports.
WTI crude prices fell nearly 1% to $77.50. Market expectations suggest a reduced likelihood of a Fed rate hike in September, with the probability falling to 30% from 58% the previous day. Prime Terminal data now indicates a 70% chance the Fed will keep rates steady. The 10-year Treasury note's yield dropped to 4.651%, indicating market participants are pricing in a less urgent rate hike due to the potential resolution of the US conflict.
In July, US Nonfarm Payrolls decreased by 23K jobs, below the expected 80K increase. Revisions for May and June reduced the total by 103K jobs, lowering earlier estimates. The US Dollar weakened following the report, with the DXY falling 0.42% to 99.54. Investors will focus on upcoming inflation data, jobless claims, and the University of Michigan Consumer Sentiment next week.
Interest rates are set by central banks to maintain price stability, typically targeting a 2% core inflation rate. If inflation falls below target, central banks may lower base lending rates to stimulate lending and economic growth. Conversely, if inflation exceeds target, central banks typically raise base lending rates to curb inflation.
Higher interest rates often strengthen a country's currency, as they make it more attractive for global investors to park their money. Higher interest rates also push up the price of the US Dollar, causing Gold's price to decrease since Gold is priced in US Dollars. The Fed funds rate is the overnight rate at which US banks lend to each other, set by the Federal Reserve at its FOMC meetings.
Markets anticipate future Fed funds rate changes, which influence financial markets' behavior in anticipation of Federal Reserve monetary policy decisions.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
This story
This is one outlet's version. Read the fullest account.
