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In early August, this letter opened with a line about the economy losing 23,000 jobs while stocks hit a record. On Friday, that July figure was revised to a gain of 21,000. The job losses never happened. Add August's 162,000, roughly three times what economists expected, and the summer now looks 55,000 jobs stronger than first reported. A month of market narrative rested on a number that turned out to be wrong. Meanwhile the US and Iran resumed military exchanges in the seventh month of their conflict, sending oil up more than 8 percent, and September rate hike expectations climbed back toward 60 percent. Two weeks from a Fed decision, much of what the market believed in August has been quietly revised.
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The revisions matter as much as the headline. August payrolls rose 162,000 against a consensus near 53,000, the strongest month since March and far above the 31,000 average of the previous year. Unemployment held at 4.1 percent, and participation rose to 61.6 percent from 61.4 percent, meaning people came back into the workforce rather than left it. That is the reverse of what we saw in July. Then came the corrections: June was lifted to 31,000, and July was revised up by 44,000, turning a reported decline into a gain. Average hourly earnings rose 0.3 percent to $37.75. There is a lesson here that outlasts this week. A first print is an estimate built on incomplete employer responses, not a fact, and markets repriced an entire policy path on one that later moved by 44,000.
The second force was the conflict. The US struck Iranian targets early in the week, Iran retaliated, and by Thursday Kuwait said it was confronting missile and drone attacks. WTI settled at $91.48, up more than 8 percent over five sessions, and energy is now the strongest sector in the S&P this year by a wide margin. That leaves the Fed in a genuinely awkward position. A labor market this solid removes the argument for patience, while an oil price this high keeps upward pressure on inflation. Governor Waller struck a balanced note midweek, saying his stance into September depends on the August inflation data and that he would prefer to hold if disinflation resumes. Hike odds swung between roughly 50 and 65 percent across the week. CPI and PPI land in the coming days and will likely decide it.
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US30 (Dow Jones) |
53,414 | -0.3% w/w |
The Dow closed at 53,414, down 0.3 percent on the week, while the S&P edged up 0.1 percent to 7,718.60 and the Nasdaq gained 0.4 percent. Friday erased a midweek rally, with the Dow shedding 272 points as the jobs report lifted yields. The curious detail is that the Russell 2000 rose on Friday while the large-cap indexes fell, the reverse of what happened after Jackson Hole a week earlier. Small caps are rate-sensitive, but they are also growth-sensitive, and a strong labor market helps domestically focused smaller companies. When the same index reacts differently to two hawkish sessions, it is usually because the second one carried better economic news alongside it.
Price action suggests: A market holding its range while it waits on the inflation data, with growth strength offsetting rate concerns.
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Gold (XAUUSD) |
Weekly close $4,476.60 | -1.4% Friday |
December gold settled at $4,476.60 on Friday, down $63.30 or 1.4 percent, giving back most of what it had gained earlier in the week. The two halves tell the story neatly. Through Thursday, gold climbed on the Iran escalation and a dollar index that dipped below 99. Then the jobs report arrived, the dollar jumped, yields rose, and gold reversed sharply, with gold mining shares falling nearly 4 percent. Two of gold's main drivers pointed in opposite directions within 48 hours: geopolitical risk pulling it up, rate expectations pushing it down. Rates won on the day, which is usually what happens when the data is this decisive.
Price action suggests: A sharp rejection of the week's highs, with rate expectations overriding safe-haven demand.
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WTI Crude Oil |
$91.48 settle | +8% w/w |
WTI settled at $91.48 with Brent near $95.60, capping a gain of more than 8 percent as the US and Iran resumed military exchanges. Kuwait confronting drone and missile attacks marks a widening of the conflict beyond the two principals, which is exactly the escalation the oil market has feared since spring. Last week we noted a rare quiet stretch in crude and said it depended entirely on the shipping corridors holding. It lasted seven days. Energy is now the top performing S&P sector this year, up around 43 percent, and that single fact explains a great deal about why the inflation debate refuses to settle.
Price action suggests: A decisive break to the highest levels of the conflict, with escalation widening rather than contained.
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EUR/USD |
DXY below 99, then rebounded |
The euro gained through Thursday as the dollar index slipped below 99 to its weakest since late August, then handed those gains back when the payrolls data landed. That round trip in four sessions is a fair description of where FX sits right now: the dollar is caught between a Fed that may hike and the fiscal and geopolitical worries that have weighed on it since mid-August. With the ECB meeting in the coming days, the euro finally gets a domestic catalyst of its own after weeks of trading purely on the dollar leg. Whether that changes the pattern is the thing worth watching.
Price action suggests: A round trip that leaves the range intact, with the ECB decision the next real test.
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GBP/USD |
tracked the dollar swing |
Sterling followed the same path as the euro, firming into Thursday and easing on Friday. Worth adding a layer that often gets missed here: the UK imports most of its energy, so an 8 percent jump in crude is a real headwind for the pound quite apart from anything happening with the dollar. It widens the trade deficit and squeezes household budgets. That effect is slow and will not show up in a single week of price action, but across a sustained oil move it accumulates. For now the dollar leg dominates, and the energy channel sits underneath as a quieter pressure.
Price action suggests: Movement dictated by the dollar, with the energy import burden a slower background drag.
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USD/JPY |
155.50 low | strongest yen since Aug 3 |
The yen finally had a genuine week. The dollar fell to 155.50 against it on Thursday, the lowest since early August, and its near 2 percent decline was the largest single-session drop since July 30. This happened without any intervention, which is precisely the point we have been building toward across five weeks of covering this pair. The July operation faded, the August short positioning grew crowded, and when the dollar softened for its own reasons the move was amplified by traders unwinding those bets. Friday's data reversed part of it, but a haven bid during the escalation is a reminder the yen has not lost that role entirely.
Price action suggests: A meaningful yen recovery achieved without official action, with crowded positioning amplifying the move.
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USD/CAD |
oil support vs tariff drag |
The loonie found support from an 8 percent rise in crude, its clearest tailwind in weeks, while the tariff dispute with Washington continued to work against it. Three drivers are now live in this pair at once: oil, the broad dollar, and trade policy. That is unusual, and it explains why USD/CAD has been choppy around the 1.40 area rather than trending in either direction. When a pair has three roughly balanced inputs, direction tends to come from whichever one produces the next headline rather than from any underlying trend. On the energy channel alone, the Canadian dollar remains better placed than most.
Price action suggests: Choppy balance around a familiar level, with oil strength offsetting the trade dispute.
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→ Looking Ahead
| Sep 7 |
US markets closed for Labor Day, making it a shortened week ahead of two major releases. |
| Sep 10 |
ECB rate decision and August PPI on the same day, the producer-side read on how far the oil surge has travelled. |
| Sep 11 |
August CPI, the single most important release of the month. Waller said explicitly that his September stance depends on it. |
| Sep 15 |
FOMC meeting (Sept 15 to 16) with a new dot plot, the first full set of projections under Warsh. |
| Ongoing |
The widening conflict, now involving attacks on Kuwait, with oil at its highest levels of the war. |
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I wrote about those July job losses in this letter, and they turned out not to have happened. That is worth saying plainly, because it is the most useful thing this week offered. Every number we react to on the day is provisional, and the ones that move markets most often carry the widest margins of error. This does not mean ignoring the data. It means holding your conclusions a little more loosely than the headline invites. CPI lands Friday, the Fed follows a week later. Stay patient.
Fed'n Markets
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Sources
Bureau of Labor Statistics, CNBC, Reuters, Bloomberg, Schwab, TheStreet, Investrade, and Trading Economics. Market levels reflect closing prices for the week ending September 4, 2026, and are approximate general references, not official benchmark prices.
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