Global markets extended their rally on Friday, with the return of smiles:

- Stocks across Asia-Pacific rose broadly, South Korea’s market saw a major rebound, European stocks led the way with fresh record highs, and U.S. stock futures inched higher—capital began embracing risk assets again;
- Gold prices rose for the third consecutive trading day, closing at a two-week high;
- The U.S. dollar index edged down slightly and remained below the 101 level;
- Oil prices rebounded modestly, with U.S. crude staying below $70.

First, it’s still the “a falling dollar means everything rises” playbook. The market is now dumping the “rate-hike fear” ahead of the Nonfarm Payrolls. For now, the probability the Federal Reserve will raise rates in September is about 45% (now below 50%). The market has temporarily chosen the “sweet taste of weak Nonfarm Payrolls,” rather than the “bitter taste of weak Nonfarm Payrolls.” Capital is now more willing to trade: as the dollar weakens, the probability of rate hikes falls, and global liquidity pressure eases. As for whether cooling employment implies growth risks, that can wait until next week.

Second, the big rebound in South Korea’s stock market is important for global markets, showing that short-term forced deleveraging and mechanical selling have not kept spreading. But this still can’t be taken as “AI risk is resolved”—it’s only the first wave of de-leveraging that stopped the bleeding. The market has moved from extreme panic back to normal fluctuations. Bleeding stopped, but the wound is still there.

Third, what truly determines the next step is whether the CPI will cooperate with the cooling of the Nonfarm Payrolls. If the CPI also cools, the market will keep trading “the Fed won’t raise rates.” If the CPI runs hot, the market will fall back into the chaos of weak employment but sticky inflation. If the CPI continues to cool, the market will view weak Nonfarm Payrolls as not a bad thing—but as a reason the Fed doesn’t need to raise rates. The dollar will continue to weaken, gold will stay strong, and global stocks will keep benefiting. If the CPI is hot, the market will return to the hardest combination to trade: employment weakening, but inflation not coming down—i.e., “growth getting worse, and policy can’t be eased.” In that case, the dollar could rebound, and Treasury yields could climb again, shifting the stock market from its current recovery phase into a stress test. The market isn’t fully optimistic yet—it’s just using a falling dollar to catch its breath.