US jobs data helps ease market concerns for now

European markets are on the rise despite concerns that a resurgence in UK growth could yet hinder hopes for a dovish pivot from the Bank of England in the months ahead. A raft of economic data out of the UK provided high expectations for sterling volatility in early trade today, but traders were undoubtedly caught off-guard by the sheer size of the move for the UK GDP release. Rishi Sunak will be breathing a little easier this morning, after the dramatic 0.6% uptick in first quarter growth took the country out of recession territory. Strength across both services (0.7%) and production (0.8%) sectors helped bring about a healthy expansion for the UK, while construction provided the one notable drag for Q1 growth. While we saw an initial bump for the pound, those gains have been tempered somewhat as traders attempt to gauge whether this strong data might drive a fresh bout of inflation pressures or temper the BoE’s desire to act swiftly. The FTSE 100 has been largely unmoved from its bullish trajectory, with the index hitting yet another record high in early trade.

US markets looks set for a strong flourish after a week that has been dominated by buying pressure. Yesterday’s sharp jump in unemployment claims helped build on the recent payrolls decline, helping to build a narrative that the jobs market has started to take a turn for the worst. However, this perception that the Fed will soon be forced into slashing rates could be challenged next week, with the CPI release likely to hammer home fact that resurgent price pressures make a return to 2% difficult to see as things stand.

All eyes on the Canadian jobs report later today, with last month having brought about the first negative employment change figure in eight months. With the Bank of Canada Governor Macklem has outlined expectations that inflation will around 2.9% for several months, there is a strong chance we will have to wait until 2025 to see CPI fall back to target. However, with markets currently pricing in a June rate cut from the BoC, the rebound in Canadian employment expected today could yet see those expectations tempered somewhat.