Evening digest: Trump pressures Fed as US jobs rise, gold falls

President Donald Trump renewed pressure on the Federal Reserve to lower interest rates after stronger-than-expected August jobs data increased expectations of a September rate hike.

US employers added 162,000 jobs in August, sharply exceeding forecasts and keeping the unemployment rate at 4.1%.

Gold prices fell as stronger labor data boosted expectations for higher interest rates and lifted the US dollar.

Oil prices declined on Friday but remained on track for weekly gains of more than 6% amid renewed US-Iran military exchanges.

Trump renews pressure on Fed to cut interest rates

President Donald Trump intensified his pressure on the Federal Reserve on Friday, calling for lower interest rates after a stronger-than-expected August employment report boosted expectations for a potential rate hike this month.

In a social media post, Trump urged Fed Chair Kevin Warsh and other policymakers to lower borrowing costs, saying, “LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT.”

Trump argued that high interest rates put the US at a disadvantage and later said the country should have a policy rate of 1% or even 0.5%, rather than the current level near 4%.

The comments marked a renewed pressure campaign against the central bank.

Trump had eased his criticism of the Fed after Warsh replaced Jerome Powell as chair, but Friday's remarks revived concerns about political pressure on monetary policy.

The president also defended his threat to restrict trade with countries including Switzerland, Mexico and the European Union, although such a move would likely face legal challenges.

August jobs report strengthens case for Fed Rate hike

The US economy added 162,000 nonfarm jobs in August, according to the Bureau of Labor Statistics, significantly exceeding the 53,000 increase economists surveyed by Dow Jones had expected.

The unemployment rate remained at 4.1%, in line with forecasts.

August recorded the strongest monthly employment increase since March, offering a more positive picture of the labor market following weaker hiring during the summer.

July’s employment figure was also revised sharply higher. The BLS said the economy added 21,000 jobs in July, compared with the previously reported loss of 23,000 positions.

However, wage growth remained a concern. Average hourly earnings rose 0.3% in August and were up 3.1% from a year earlier.

The stronger jobs data increased market expectations for a September rate hike. Traders were pricing in roughly a 60% probability of a hike, while later short-term interest-rate futures implied about a 65% chance.

Gold price falls as rate hike bets rise

Gold prices declined sharply after the employment report strengthened expectations for higher US interest rates.

Spot gold fell 0.79% to $4,437.61 an ounce and briefly dropped more than 2% to an intraday low of $4,364.99.

US gold futures for December delivery fell 1.35% to settle at $4,478.70.

Stronger employment data can reduce the appeal of non-yielding gold by increasing expectations for higher interest rates.

The US dollar also strengthened following the report, making dollar-denominated bullion more expensive for buyers using other currencies.

Independent analyst Tai Wong said in a Reuters report that gold had stumbled after the strong jobs report made a September rate hike more likely unless upcoming CPI data proved weak.

The market will now focus on next week’s consumer and producer inflation data for further clues about the Fed’s policy path.

Oil price gains

Oil prices reversed losses on Friday and remained on course for strong weekly gains as renewed US-Iran military exchanges kept a risk premium in crude markets.

Brent crude futures were up 0.79% at $96.27 a barrel, while West Texas Intermediate crude gained 0.20% to $91.48.

Brent was up 7.6% for the week and WTI had gained 9.58%.

Norbert Rucker, head of economics and next-generation research at Julius Baer, told Reuters that oil appeared to be in a phase where recurring hostilities were repeatedly reviving a risk premium in prices.

He added that there was no indication the latest escalation had materially affected Middle Eastern oil exports, describing the rally as largely driven by market sentiment and fear.

Citi raised its third-quarter average Brent forecast to $86 a barrel from $80, while ANZ lifted its short-term Brent forecast to $95 and warned of further upside if the Middle East conflict intensifies.