Top of the Morning: May Jobs Report takeaways

What the desk is arguing

The desk interprets the stronger-than-expected job growth from the UBS May report as a signal of labor market resilience, which may not substantially shift Fed rate hike expectations. Specifically, the addition of 172,000 jobs indicates not only robust employment but also a diverse sectoral contribution, particularly from leisure and government, accounting for over 100,000 of those gains. This assessment is crucial as it aligns with the desk’s outlook that policymakers may remain cautious given the simultaneous slowdown in wage growth.

Moreover, the positive revisions to previous months lifted the three-month moving average to around 180,000, reinforcing a trend of robust job creation. As wage growth decelerated, this indicates that inflationary pressures may not build as aggressively, thereby supporting a more dovish Fed stance moving forward, as policymakers weigh these factors against pressing inflation data expected next week.

Where it sits in our coverage

Our consensus for the USD/EUR pair targets 1.075, with a range between 1.04 and 1.12. This outlook is informed by projections from various firms, including: - jpmorgan: 1.10 (Mar-26) - bofa: 1.04 (Mar-26)

The desk's interpretation aligns more closely with jpmorgan's mid-range target, while it diverges from bofa's conservative outlook. This positions us at a slightly optimistic view compared to the general consensus in the marketplace.

How other firms see it

Firms like jpmorgan are aligned with the desk in viewing the employment data as a positive sign for economic resilience, while bofa contrasts this view, highlighting potential risks of recession in light of sluggish wage growth and broader economic uncertainties.

As traders look ahead, keep an eye on USD/EUR fluctuations as they may be influenced by upcoming inflation data, which overlaps significantly with the current labor market dynamics documented in the jobs report. The interplay between these economic indicators could offer valuable insights into Fed policy direction.