US rate hike talk cools on softer jobs data
At a Glance
The recent weaker-than-expected US jobs data has diminished the likelihood of immediate rate hikes by the Federal Reserve, as highlighted in the latest commentary. Per the full note from ing-think, the economy added only 57,000 jobs in June, significantly below the expected 113,000, with a notable decline in the labor force participation rate revealing deeper worker disengagement. This data points to a potential pause in monetary tightening as the Fed weighs sluggish job growth against inflation indicators. The absence of immediate catalysts on the calendar allows the market to digest this data without the pressure of upcoming economic releases.
Key Takeaways
- 01US job creation fell sharply in June, with only 57,000 jobs added versus expectations of 113,000.
- 02The unemployment rate dipped to 4.2%, but this was misleading due to a significant drop in labor force participation.
- 03The weak jobs data is likely to keep the Federal Reserve on hold regarding rate hikes in the near term.
- 04Our USD/EUR target remains cautious amid mixed signals from the labor market.
Full Analysis
What the desk is arguing
The latest US jobs report reveals a worrying trend and signals that the Federal Reserve may hold off on further rate hikes. According to ing-think, June’s non-farm payroll growth was a meager 57,000 against a forecast of 113,000, emphasizing the fragility of the labor market ahead of potential Fed actions.
Further underscoring this stance, the unemployment rate fell to 4.2%, but this decline masked a significant disengagement from the labor force with more than 700,000 individuals leaving the workforce altogether. A sharp drop in labor force participation among prime-age workers raises concerns about the overall health of the US economy.
Where it sits in our coverage
Our consensus target range for USD/EUR remains centered around 1.075, with a minimum of 1.04 and a maximum of 1.12. Notably, jpmorgan has set its target for March 2026 at 1.10, placing it in line with our outlook.
The desk's view aligns with the general consensus that monetary policy will likely remain unchanged amid these softer job figures, albeit bofa is positioned lower, forecasting 1.04 for the same tenor. Our target resides at the higher end of the spread, reflecting a cautious but constructive outlook on the USD against the Euro.
How other firms see it
Firms such as jpmorgan and others seem to agree that the Fed will remain on hold, given the labor market's unexpected weakness. Conversely, bofa advocates a more bearish outlook amid these developments, suggesting further downside risks to the dollar.
Traders should keep an eye on USD/EUR as reactions to the Fed's policy decisions unfold, especially with the looming potential for rate adjustments depending on labor market improvements or further deterioration in data.
Market Implications
Traders should monitor the USD/EUR pair closely, especially given the current consensus view that further Fed tightening is less likely in response to recent labor data. Pay attention to the 1.075 level as it serves as a psychological barrier for traders looking to position ahead of potential policy shifts.
From the original
Articles US rate hike talk cools on softer jobs data 14:59 United States Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download US job creation slowed after a decent three-month run while the unemployment rate fell, but this was primarily due to worker disen
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4 itemsSurprise US job weakness casts serious doubt on Fed rate hikes
Lead — The recent US jobs report has cast significant doubt on the Federal Reserve's rate hike trajectory, with unexpected job losses signaling potential risks to growth. This data prompts a reassessment of outlooks ahead of the September FOMC meeting, where economic indicators will weigh heavily on potential policy changes. Per the full note from ING, the US economy lost 23,000 jobs in July, with revisions to previous months further complicating the outlook. Market expectations for rate hikes have diminished as participation rates drop and wage growth slows, which could dampen the Fed's inflation-targeting stance.
Top of the Morning: The week in review and preview
The latest jobs data from the US labor market presents a mixed picture that is likely to influence Federal Reserve policy in the near term. Per the full note from UBS, nonfarm payrolls increased by 139,000, exceeding expectations but accompanied by substantial downward revisions of 95,000 for the previous two months. This subtle deceleration indicates the Fed may hold off on any rate cuts as we head towards the mid-year, especially given expectations for slower payroll growth driven by tariff impacts later this year.