THINK Ahead: US jobs data and the ECB’s inflation test
At a Glance
The desk anticipates positive market sentiment following the upcoming US jobs data release, as noted in the commentary, which highlights the potential for a robust job report amidst falling gasoline prices easing inflation. Per the full note source, the July 4th holiday has led to a shortened reporting week, but a projected June non-farm payroll increase of around 110,000 reinforces the Federal Reserve's rate hike expectations. This is indicative of continued support for risk appetite as economic indicators are trending positively ahead of the release.
Key Takeaways
- 01Expect strong US jobs report with a projected increase of around 110,000 non-farm payrolls.
- 02Falling gasoline prices are easing inflation pressure, supporting consumer spending.
- 03Positive economic signals suggest a supportive environment for risk assets.
- 04Consensus target for USD/EUR is 1.075, with varying firm expectations.
Full Analysis
What the desk is arguing
The desk posits that the upcoming US jobs report is likely to bolster market optimism, coinciding with lower inflationary pressures fueled by falling fuel prices, as indicated in the commentary. The expectation of a non-farm payroll reading of approximately 110,000 suggests sustained employment growth, crucial for maintaining Federal Reserve rate hike projections.
Additionally, the report is supported by favorable manufacturing surveys, which point toward a positive ISM reading, further assisting in lifting market sentiment. The overall economic backdrop indicates a supportive environment for risk assets as job gains continue.
Where it sits in our coverage
Currently, we have a consensus target of 1.075 for USD/EUR, with the following firm targets: - jpmorgan: 1.10 by Mar26 - bofa: 1.04 by Mar26
The desk's outlook aligns closely with jpmorgan, sitting slightly above the median forecast, indicating that the bullish sentiment on US jobs could influence a stronger USD in the near term.
How other firms see it
Firms such as jpmorgan are aligned with the bullish outlook on the USD, anticipating upward pressure on the dollar following solid US job data. Conversely, bofa presents a contrary view, forecasting a more tempered USD appreciation at 1.04.
This expectation around job growth particularly intersects with the EUR/USD trajectory, which may react to both the jobs data and upcoming Fed communications.
Market Implications
Traders should monitor the expected non-farm payroll figure around 110,000 as a potential catalyst for USD strength against the EUR. A robust jobs report could see USD/EUR testing levels above 1.075 if optimism translates into increased risk appetite.
From the original
Articles THINK Ahead: US jobs data and the ECB’s inflation test 12:10 Key Events Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download In a holiday-shortened week in the US, Thursday’s June jobs report should be a cause for cheer, while falling gasoli
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Top of the Morning: May Jobs Report takeaways
The UBS May jobs report revealed stronger-than-expected employment gains, with the economy adding 172,000 jobs, signaling resilience in the labor market. Per the full note from UBS, sectors such as leisure and government contributed significantly to the job growth, alleviating previous concerns surrounding the labor outlook. Despite the solid job numbers, wage growth slowed, suggesting persistent disinflationary pressures that could limit immediate Fed rate hikes. Overall, these dynamics place the central bank's policies in a cautious light as market participants assess subsequent inflation data due next week.