Mixed US Nonfarm Payrolls data, investors more confident on two Fed rate cuts before end of 2024

At first glance, June's NFP data might appear to be slightly better than expected, failing to confirm the recent signs of a mild loosening in the US labour market. Yet, this impression is misleading. Indeed, the headline reading showed a slightly higher-than-expected change in nonfarm employment (206k vs. 190k).

This was, however, a very minor surprise, accompanied by a sizable downward revision to the last two months' data (-111k) and an unexpected rise in the unemployment rate (to 4.1%). Meanwhile, wage growth eased as expected (to 0.3% MoM and 3.9% YoY) and is now printing at levels much more comfortable for the Fed. 

As the June report did not clearly stand out in either direction, the US dollar depreciation was negligible - the EUR/USD pair remains in a tight range, slightly above the 1.08 level. The market-implied rates pricing also changed very modestly, with investors now just a tad more encouraged that we will witness 2 rate cuts before the end of the year. We agree with this assessment.

Now, the markets' attention once again shifts to inflation data and the ongoing presidential campaign, which should be key for USD volatility in the coming weeks.