Today all eyes are on US labour market data where the markets will be looking to gain an insight into the health of the US economy and the extent to which the jobs market is feeding into inflationary pressures ahead of the Fed’s meeting on 12 June.
Chief amongst the data releases is Non-farm payrolls where the general market consensus is forecasting a print of 190,000, indicating a considerable slowdown from last month’s figure of 253,000. If this figure is realised, it would mark the second lowest print since December 2020, though it would still be considerably over the 100,000 jobs needed each month to keep up with growth in the working age population. Indeed, earlier last year, Powell suggested that non farms would need to ease to some 100,000 to remain in line with population growth while not overly impacting inflationary pressures.
This comes as the markets are expecting to see unemployment tick up slightly from 3.4% to 3.5%, indicative of how investors are expecting to see a slight slowdown in the jobs market which remains historically tight. The slight slowdown in the labour market is not however expected to translate into slower wage growth which is forecast to remain in line with April’s figure of 4.4%.
The importance of today’s data cannot be understated given that many Fed policy makers are teetering on whether to pause or hike at the next FOMC meeting on 14 June. As we looked at yesterday, May’s minutes detailed how “several participants noted that if the economy evolved along the lines of their current outlooks, then further policy firming after this meeting may not be necessary”. However, the minutes also indicated that “many participants focused on the need to retain optionality after this meeting” and thus their view on whether to raise rates or pause will be driven by data…not least labour market data.
Equities Buoyed on Fiscal Responsibility Act
Investor sentiment across equity markets was buoyed yesterday following the progress made around passing the Fiscal Responsibility Act, which looks to ensure the US avoids a technical default by suspending the debt ceiling until 2025. The bill, which comfortably passed the House by 314-117 on Wednesday and the Senate yesterday now just needs to get signed off by Biden (one of the authors of the deal). For example, the MSCI world equity index which tracks shares in 50 countries, closed 1.1% higher during yesterday’s session as the Stoxx 600
and FTSE 100 closed up 0.78% and 0.58%, respectively. This was welcome news given that over the month of May, the FTSE lost 5% while Wednesday’s session saw the Stoxx 600 close at two months lows. Across the pond, yesterday’s session saw the S&P 500 close 0.99% higher while the tech heavy Nasdaq rose 1.28%. The Dow Jones Industrial Average also rose close to half a percent higher. As such, all eyes are now on US labour market data to see whether yesterday’s risk-on sentiments may continue.
If you would like a PDF of this commentary, please contact us and we'll be in touch.Contact us
Find out how we have helped our clients meet their hedging requirements.
Raising rates from Federal reserve, DXY appreciates to highest level, and average sick days on the rise for the UK
Breaking the second leg of HS2, release of UK GDP figures on Friday, and Financial Times suggest US are sending long-range missiles to Ukraine.
Interest rates held by Bank of England, lower-than-expected UK retail sales, and contracting German PMIs.
Possibility for another Fed rate hike, today's Bank of England interest rate decision, and a look at ONS labour market data.
Warnings of greater risk from UN Secretary-General on the back of the Russian invasion of Ukraine, ease of inflation for the UK, and today's Fed interest rate decision.
C5+US summit hosted by Biden, deal made with the US and Iran, and rising oil prices.
US Dollar Index sees six-month highs, English councils struggling to meet financial liabilities, and potential for Brexit deal rewrite.
European Central Bank's tenth consecutive rate hike, US retail sales climb, and trouble for HS2 plans.