Today is an important day for financial markets as we will get to see the latest US NFP report. The Fed is now more focused on the labour market than inflation, and an unexpected deterioration might force their hand to cut rates.
The European session is pretty empty on the data front as we will just get the Eurozone Retail Sales data which is rarely a market moving release.
12:30 GMT/08:30 ET - US June NFP
The US NFP is expected to show 190K jobs added in June vs. 272K in May and the Unemployment Rate to remain unchanged at 4.0%. The Average Hourly Earnings Y/Y is expected at 3.9% vs. 4.1% prior, while the M/M measure is seen at 0.3% vs. 0.4% prior. The Fed at the moment is very focused on the labour market as they fear a quick deterioration.
As a reminder, they forecasted the unemployment rate to average 4% in 2024, so I can see them panicking a bit and deliver a rate cut if unemployment rises to 4.2% in the next couple of months. For now, the data suggests that the labour market is rebalancing via less hires than more layoffs and overall, there are no material signs of deterioration.
12:30 GMT/08:30 ET - Canada June Labour Market report
The Canadian labour market report is expected to show 22.5K jobs added in June vs. 26.7K in May and the Unemployment Rate to tick higher again to 6.3% vs. 6.2% prior. The last report surprised to the upside although we got another uptick in the unemployment rate. The key part was wage growth jumping to 5.1% vs. 4.7% prior, which is what the BoC is most focused on.
As a reminder, the last week the Canadian CPI surprised to the upside, with the underlying inflation measures rising but remaining within the 1-3% target band. This made the market to pare back rate cuts expectations with the probabilities now standing around 53% for no change. We will get another inflation report before the next BoC policy decision, but if we see another jump in wage growth, then the central bank will likely need very good CPI figures to deliver a rate cut in July.
Central bank speakers:
- 09:40 GMT - Fed's Williams (neutral - voter)
- 12:15 GMT/08:15 ET - ECB's Elderson (neutral - voter)
- 17:15 GMT/13:15 ET - ECB's Lagarde (neutral - voter)
