Weak NFP Hits the Dollar and Supports Gold as Markets Turn to US Inflation

The US NFP release comes in as a surprise, pushing the US Dollar significantly lower. Due to the end of the World Cup, economists were expecting the employment data to come in weaker than expected. However, the US NFP change fell by 80,000, significantly lower than predictions. For this reason, expectations of interest rate hikes in September fell.

In response to the NFP release, the stock market found further support, as did Gold. However, the US Dollar Index fell close to a two-month low. According to the Bank of America, NFP is triggering volatility, but the upcoming inflation release will be more significant and could trigger longer-lasting trends.

Non-Farm Payrolls - Weak NFP Shocks Markets
The average NFP change over the past six months is 86,000, and most economists were expecting the latest release to be 75,000. However, many institutions and fund managers were expecting a figure as low as 50,000 due to the end of the World Cup. The official NFP figures fell by 23,000, marking the first time in five months that the US employment change has fallen.

Average hourly earnings increased by only $0.02 to $37.62, equivalent to roughly 0.1% month-on-month, while annual wage growth slowed to 3.2%. This is important for the Fed because weaker wage growth reduces one source of inflationary pressure.

The fall in unemployment from 4.2% to 4.1% looks positive at first. However, the overall figure confirms this does not necessarily confirm a strengthening labour market. This is because of the weak NFP figure and the decline in the labour force participation rate.

For this reason, the employment data does not support an interest rate hike despite the Federal Reserve chairman’s wish to hike. Consequently, the Consumer Price Index (inflation rate) on Wednesday will be vital for market pricing.

Consumer Price Index - Inflation to Determine the Next Trend?
The July US Consumer Price Index (CPI) report will be released on Wednesday, 12 August at 8:30 a.m. ET. The release will be the most important announcement for the Federal Reserve after Friday’s unexpectedly weak employment report.

Investors and economists are expecting the inflation rate to fall from 3.5% to 3.4% and core inflation to fall to 2.5%. If inflation falls below 3.4%, expectations for a September rate hike would likely decline sharply. Such an outcome could trigger significant market volatility as traders rapidly reprice interest rate expectations across currencies, equities, bonds, and Gold.

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Publication date:

10 August 2026 - 11:20 (GMT)

Over the past week, the possibility of a rate adjustment in September fell from 67% to 44%. If the inflation rate falls, the chances of a rate hike will likely fall below 30%. As a result, the US Dollar is likely to fall, while Gold and stocks find support. JP Morgan has also advised that it is increasing its target for the S&P 500 to 8,000 due to higher earnings and AI.

Gold - Finds Support from a Potential Pause and a Weaker Dollar
Gold is showing strong bullish momentum, outperforming the US Dollar and experiencing higher volatility in line with its inverse correlation. Trend-based indications are also supporting a bullish bias, with the price trading above the VWAP, above its previous highs, and with clear bullish crossovers.

In terms of technical analysis, the price is only witnessing a bearish indication from divergence on oscillators. Divergence can be seen mainly on the RSI on multiple timeframes. The divergence signal may indicate a retracement or change in the trend. However, this will need to have a clear price driver. For example, if inflation remains at 3.5%, Gold again may come under pressure in the short term.

If the price declines and comes under pressure from CPI, a possible target remains the $4,222.00 level. This level is a support area based on price action and in line with the 75-bar exponential moving average. This would also be a similar price movement to previous impulse waves. Upward price movement, on the other hand, sees a clear resistance level at $4,382.00. If the bullish price movement experiences stronger momentum, a potential target may be $4,570.00, which is the average price of 2026 so far.

Key Takeaways:
- US NFP surprised sharply to the downside, with payrolls falling by 23,000 and wage growth slowing. The unemployment rate improved slightly falling from 4.2% to 4.1%.
- Rate-hike expectations dropped significantly, helping support Gold and equities while pushing the US Dollar Index towards a two-month low.
- Wednesday’s CPI release is now the key market catalyst, with inflation expected to ease from 3.5% to 3.4% and core inflation to 2.5%.
- A softer CPI reading could push September hike expectations even lower. A lower inflation rate will likely pressure the US Dollar while supporting Gold and stock markets.
- Gold remains technically bullish, with resistance around $4,382 and $4,570, while $4,222 stands out as an important downside support level.