Rates Spark: More guidance from jobs data than the Fed
The desk is focused on how US jobs data will provide more clarity than the Federal Reserve's recent guidance on rates, which remains ambiguous. Per the full note, the September FOMC meeting presents a 'coin toss' scenario, compelling traders to reassess jobs data outcomes for clarity on rate direction. Anticipated non-farm payroll growth stands at 80,000, although there is skepticism about this figure being slightly overestimated based on recent employment indicators. Meanwhile, the EUR/USD pair trades around 1.1419, with the broader consensus reflecting a median target of 1.1583 for December 2026.
What the desk is arguing
The desk asserts that today's US jobs report will have a pronounced impact on market expectations regarding Federal Reserve rate hikes amid vague central bank communication. Per the full note, the Fed's lack of clarity is creating significant uncertainty, aligning the focus on the job numbers for any directional cues.
Current forecasts predict a non-farm payroll increase of 80,000, though recent trends suggest this number may be revised lower, thereby reinforcing a position of 'wait and see' for market players. This cautious sentiment is particularly critical as initial claims data has been surprisingly low, juxtaposed with mixed signals from other labor indicators, making today's jobs print pivotal for future Fed actions.
Where it sits in our coverage
Our consensus target for EUR/USD stands at 1.1583, with a range spanning from 1.1200 to 1.2000. Notable firm targets include: - commmerzbank: Dec-26 at 1.2200 - goldman: Dec-26 at 1.1200 - deutschebank: Dec-26 at 1.2500
This thesis is positioned at the upper range of current market views, supported by a mix of firm insights ranging from moderate optimism to cautious stances as they weigh the jobs report against global risk sentiment.
How other firms see it
Several firms are aligned in their views, including goldman, morganstanley, and deutschebank, reflecting a similar bullish sentiment for EUR/USD driven by anticipated Fed actions post-jobs report. On the contrary, firms like tmgm and danskebank exhibit cautious forecasts, which may dampen bullish perspectives.
The trajectory of EUR/USD is closely monitored against the backdrop of US jobs data, which stands to influence expectations about the Fed's rate path and overall risk appetite in FX markets.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Today's US jobs report is crucial for clarifying Fed rate hike probabilities.
- 02Market consensus expects non-farm payrolls to rise by 80k, though skepticism surrounds this figure.
- 03EUR/USD trades near 1.1419, with firms generally aligned toward bullish targets into 2026.
- 04The Fed's unclear communication adds to market uncertainty and volatility potential.
Market implications
Focus on the upcoming jobs report to potentially shift the 10-year yield in the US. Should payroll numbers surprise to the downside, expect shifts in positioning around the EUR/USD, particularly if it breaches support levels near 1.1400, leading to further volatility.
Risks to this view
A significantly weaker jobs report could undermine bullish forecasts for EUR/USD, leading to a reassessment of rate hike expectations from the Fed. Conversely, a stronger print could solidify confidence in risk assets, diminishing EUR strength.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Bank of America | Bearish | 1.1200 |
ANZ | Bearish | 1.1400 |
UOB | Bullish | 1.1565 |
Articles Rates Spark: More guidance from jobs data than the Fed Published 07:28 Rates Spark Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The Fed is leaving markets guessing on rates, with a September hike still a close call. This turns the focus to today’s US jobs report, while resilient risk sentiment and elevated real yields keep long-end rates under pressure Benjamin Schroeder With a close call between a hold or hike by the Federal Reserve in September, markets will turn their attention to today's jobs data Markets turn to jobs data amid limited Fed guidance At its last meeting, the Federal Reserve did not provide any clarity on its interest rate path, with the market still viewing the September FOMC decision as something of a coin toss between holding and hiking rates. Until then, markets will still get two inflation and two jobs reports.
One of the latter is up for release today. While recent activity indicators still pointed to stronger momentum, the signals for the jobs market were actually more mixed, with the employment subcomponent of the important services ISM coming in particularly weak. On the other hand, weekly initial claims numbers have been undershooting expectations of late.
For Friday’s release, the market median consensus is looking for a non-farm payrolls increase of 80k, although there appears to be a clustering around a slightly lower number of 75k. Our economist also sees the median consensus on the slightly high side, if anything, and a lower reading should leave the Fed with all options into the next meeting – but that is already reflected in market pricing. The unemployment rate is expected to stay at 4.2%.
More generally, market optimism remains upbeat looking at the broader risk markets, in particular equity markets. This in turn helps keep the 10y yield in the US above 4.6% and the 10y Bund just above 3.10%. And it is indeed real interest rate components that are keeping longer-term rates at elevated levels while inflation expectations have come down again this week.
Oil managed to dip below $80 on Thursday, although overnight news was not supportive of an imminent deal and prices bounced higher again. Markets have been eyeing an agreement around the Strait of Hormuz by the end of this week, but as we approach the deadline, confidence will likely fall further. Friday's events and market view The main focus on Friday is the official US jobs report for July.
The median estimate is looking for an 80k increase in non-farm payrolls after 57k in June and an unchanged unemployment rate at 4.2%. The Fed’s Tom Barkin is scheduled to speak at a fireside chat shortly after the jobs data release. The only government supply comes from a small reverse inquiry auction out of Belgium.
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