All eyes on the jobs report

A tentative start to trading on Friday as we wrap up another action-packed week with the US jobs report in a couple of hours.

Jerome Powell's comments on Wednesday made clear the direction of travel that Fed policymakers are keen to undertake but ultimately, the data must allow for it. So far, that has very much happened with inflation falling more than anticipated in October, the manufacturing sector softening, supply chains improving and labour market performing less well.

Today's jobs report will offer further insight into whether this last point continues to be the case. Jobs growth around 200,000 would continue the trend since earlier this year and, alongside rising jobless claims, point to a cooling in the labour market.

But it's the wages that the Fed cares most about. A moderation in earnings growth is essential to get policymakers on board and perhaps even bring down the terminal rate over the coming months. It's not just about putting inflation on a better trajectory, it's about ensuring it can return to target on a sustainable basis and that requires earnings to rise at a more modest rate to ensure inflation doesn't become entrenched.

Considering the data we've seen since the last meeting, I feel it would take something truly shocking for the Fed to change course now. And perhaps even that would need to be backed up by a nasty shock from the CPI data a day before they announce their next rate decision. An encouraging report today would be very welcome and could see markets end the week on a high.

Steady going into a highly uncertain weekend

Oil prices are quite steady on approach to the weekend. There remains considerable uncertainty around the action OPEC+ will take when it meets on Sunday, although there's every chance that the meeting will be delayed or that discussions take longer than normal, as a result of the price cap being finalized by the EU.

A cap of around $60 is now reportedly close to being signed off, the impact of which is still unclear as Russia already sells to its trading partners at significantly discounted levels. The Kremlin has threatened countries that abide by the cap with being cut off which will leave some in a very uncomfortable position; choosing between losing access to cheap Russian crude or facing G7 sanctions. As ever, the devil will be in the detail. But one thing is clear, crude carries significantly more weekend risk and could be extremely volatile on the open next week.

Rally pauses ahead of the jobs data

Gold is basically unchanged on the day, with traders clearly having an eye on the US jobs report before deciding what to do next. Given the data of recent weeks, Powell's comments on Wednesday and the recent trend in the yellow metal, gold bulls may have good reason to be optimistic, especially if handed a remotely favourable - or not overly hot - jobs report. Of course, when the narrative is set this way going into a release, it always feels there's scope for a nasty shock and unusually large negative reaction.

What is interesting is that gold has breached $1,780 which had been a solid area of resistance recently having been a major level of support in the first half of the year. It broke through there in the aftermath of Powell's comments before settling around $1,800. A break above here following today's jobs report could put gold in a very bullish position.

Can Bitcoin continue its relief rally?

Bitcoin has benefited from the improved risk appetite in the broader financial markets this week, allowing for a minor relief rally back towards $17,000. This is only the upper end of its range from the last few weeks but a period of not making new lows in response to further disturbing headlines relating to the FTX collapse will always be welcome. A period of consolidation may be the best the crypto community can hope for at this point, although given where it's trading now, it will be interesting to see how it responds to a weaker jobs report, should it materialise.