Expectations for Payrolls on Thursday are pretty high

Barbara Rockefeller Rockefeller Treasury Services, Inc.

Outlook

Today the ECB starts its annual meeting in Sintra, Portugal, with new Fed chief Warsh on the agenda for Wednesday. It goes without saying that his every word will be examined under a microscope.

Expectations for payrolls on Thursday are pretty high. Bloomberg has an estimate of 113,000, which compare well with the average through May of about 115,000. Nobody is talking about the ADP private sector version on Wednesday. It was 122,000 last time for May, the most since Jan 2025. Is good job growth a reason for the Fed to be less hawkish? A small school of thought takes this view.

We wonder if it’s important that oil traders declined to respond to the latest war news—Iran claiming control of the Strait come hell or high water. We have said all along that the Strait is the key to markets’ response to the war. Now that traffic through the Strait is back to a fraction of what the world needs, why are traders not responding?

The easy answer is TACO. Trump has lost his appetite for war now that he has pretty much lost the war. The easy solution is to let Iran think it’s in control, approve the tolls, and let the next guy figure it out.

If that’s what traders think, a temporary dip in shipping is acceptable and not a cause to move any prices in any market. The dollar didn’t show any safe-haven response to the war resumption over the weekend.

Forecast

If we are getting a correction, this week can easily spoil it. It’s month-end, quarter-end and half-year end, suggesting re-allocations.

In addition, the market will start thinning out and draining liquidity, meaning a small move can show a big chart event that lacks true volume backing. Those who want to go short the dollar may well cover, giving it a lift due to plain, old-fashioned positioning. Who would want to keep a short dollar position over a long US holiday? It’s sanely risk-averse to cover.

A peculiar possibility--payrolls on Thursday are likely to be pretty good, at least superficially, reinforcing the dovish Fed idea. This is silly. We need to believe Warsh when he says he intends to crush inflation. The current reading of the CME Fed funds betting has at least one hike before year-end.

A question: if the Doha talks fail and/or the US gives in on Iran controlling the Strait, with or without a toll, does that mean oil prices rise again? It has a decent probability. So, what is the effect on the dollar? It used to be that higher oil prices meant a lower dollar, but that inverse correlation went away several years ago. It may be coming back.

About trading

We often write “pare positions” and “don’t bet the ranch.” These snippets arise from our inability to smell surefire direction on the chart. It’s a form of risk assessment without statistics.

When we get AI, we will be able to ask “what percentage of the time does MACD correctly predict the next move in the AUD over the next 5 days?” If you ask that question today, the answer you get is unreliable, chiefly because the question is not specific enough and lacks context. How big a move? what about an account-killing big loss on Day 2 that is reversed by Day 5? Making the question detailed enough to drive the reply into reliability is tough.

But that’s about indicators. It’s not about risk. People get advanced degrees in risk management. They are also using AI. The issue becomes whether traders know how to ask the right questions of AI to get profit-generating outcomes.

Elm Wealth is featured in the current issue of The Economist for testing seasoned professional managers against several AI’s. Everybody fails, including the AI’s. Nobody got the upcoming direction of the prices right.

This is an excerpt from “The Rockefeller Morning Briefing,” which is far larger (about 10 pages). The Briefing has been published every day for over 25 years and represents experienced analysis and insight. The report offers deep background and is not intended to guide FX trading. Rockefeller produces other reports (in spot and futures) for trading purposes.

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Author

Barbara Rockefeller
Rockefeller Treasury Services, Inc.

Experience Before founding Rockefeller Treasury, Barbara worked at Citibank and other banks as a risk manager, new product developer (Cititrend), FX trader, advisor and loan officer. Miss Rockefeller is engaged to perform FX-relat

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