US labor market call
BofA emphasizes the importance of US payrolls and retail sales data despite distractions from AI and Middle East shocks, arguing these releases provide crucial signal on the economy's path post-shutdown and could drive FX volatility more than usual.
What the desk is arguing
BofA Global Research argues that while the market is distracted by twin uncertainty shocks from AI and Iran, labor market and retail sales data remain critical for gauging the US economy's underlying trajectory. They believe Friday's data releases could have outsized impact on risk assets and FX markets, as the rate market seeks an anchor amid elevated uncertainty.
Where it sits in our coverage
We have no internal coverage data on specific currency pairs or consensus forecasts for this topic. The commentary is macro-level, focusing on US data dependency rather than explicit FX levels.
How other firms see it
No other firm views were provided in the source. However, the general market consensus expects payrolls to show moderate growth, with risks tilted to the downside given recent labor market softening.
How firms align with this view
Key takeaways
- 01BofA stresses payrolls and retail sales as key data points despite AI and geopolitical noise.
- 02Market seeks anchor amid AI and Iran shocks; data could drive FX more than usual.
- 03Authors disagree with the notion that data is backward-looking in current environment.
Market implications
Stronger-than-expected data could boost USD and risk assets, narrowing rate cut expectations. Weak data would likely renew recession fears, pressuring USD and fueling safe-haven flows into JPY and CHF.
Risks to this view
Escalation in Middle East conflict could overshadow data impact. AI disruption uncertainty may distort labor market signals. Potential data revisions or seasonal anomalies could mislead interpretations.
Please join Ralf Preusser in conversation with Alex Cohen, Stephen Juneau and Meghan Swiber to discuss the US labor market. The US rate market continues to look for an anchor against the backdrop of the twin uncertainty shocks of AI and now Iran. Given developments in the Middle East it may seem backward looking to focus on payrolls, and retail sales.
We disagree. Data remains of utmost importance in providing some signal about the underlying path that the US economy is taking after the shutdown. In driving risk asset performance, Friday's data may also matter more than usual for the FX market.
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