THINK Ahead: US jobs data and the ECB’s inflation test
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 , 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.
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.
How firms align with this view
Aligned with the desk view
Contrary positioning
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.
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.
Risks to this view
A significantly weaker jobs report or unexpected changes in inflation readings could prompt a reassessment of the USD’s strength, particularly if market sentiment shifts towards economic slowdown narratives. Additionally, geopolitical tensions could counteract domestic economic indicators.
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 gasoline prices are also helping ease inflation pressure. In Europe, eurozone inflation data will test ECB rate hike expectations James Knightley , Bert Colijn , Adam Antoniak , David Havrlant and Muhammet Mercan On 4 July, the US will celebrate the 250th anniversary of the signing of the Declaration of Independence THINK Ahead in developed markets United States (James Knightley) Jobs Report (Thu): America will be celebrating the 250 th anniversary of the signing of the Declaration of Independence next Saturday, resulting in a holiday-shortened week. Thursday’s June jobs report should also be a cause for cheer, with the fourth consecutive 100k+ reading for non-farm payrolls having averaged merely 8,500 per month between January 2025 and February 2026.
While a print of around 110k will not be especially stellar, it will be enough to keep the market pricing Federal Reserve interest rate hikes. The ongoing fall in energy prices is another cause for celebration, with gasoline prices set to break below $3.50 per gallon imminently. This will leave more money in consumers’ pockets while also prompting sharply lower inflation readings over the next few months.
Manufacturing surveys also suggest a decent ISM report, which, all in all, means we expect a week that should be supportive for risk appetite. Eurozone (Bert Colijn) June Economic Sentiment Indicator (Mon): After a sluggish PMI, the question is whether the second big survey on the eurozone economy shows more improvement. The Middle East deal will not have been fully incorporated yet, but with oil prices already moderating before the deal was struck, sentiment should see some improvement.
Consumer confidence, part of the indicator, has already been released and indeed ticked up. Not only sentiment about output, but also inflation sentiment is very relevant. If fewer companies intend to price through higher costs, this will be a clear dovish sign for the ECB.
Inflation (Wed): The key indicator for next week will be inflation for June from a eurozone perspective. Some positive notes on inflation recently, as businesses seem more wary about increasing prices and, most importantly, prices at the pump have come down in recent weeks, which brings the annual increase down compared to May. Markets have been adjusting ECB rate hike expectations down and the June number will be a clear mark for how concerning the inflation situation is now that the deal will bring additional relief.
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