US jobs data takes focus amid fragile US-Iran peace hopes

In focus today

• The key release today is the US April jobs report. We expect a solid report with NFP growth of 80k and unemployment rate unchanged at 4.3%. High-frequency indicators have generally been strong despite the uncertainty related to the war in Iran. The Fed puts more emphasis on the unemployment rate, as NFP growth is heavily (negatively) affected by the slowdown in labour supply growth.
• In Sweden, more detail on the preliminary GDP figures will become available when production and consumption data are published.

Economic and market news

What happened overnight

In the US-Iran conflict, the two sides exchanged fire overnight in the Strait of Hormuz (SOH), but Trump says that the ceasefire is still in effect. Trump has again threatened to resume attacks if no nuclear deal is reached, although similar threats have not always materialised. Talks remain stuck on uranium stocks, sanctions relief, SOH access and sequencing, and trust. Iran's response to the latest US proposal to end the war is expected shortly and will be key for markets to look out for.

In the oil market, Brent crude briefly fell below USD97/bbl yesterday before recovering above USD100/bbl. The renewed tensions around the SOH have caused markets to reassess the likelihood of a diplomatic breakthrough. If hostilities intensify, Brent could revisit the USD110‑115/bbl range seen earlier this week.

US-EU tariffs: Trump has set a 4 July deadline for full implementation of last year's trade deal after speaking with von der Leyen, threatening "much higher" duties on EU goods, including raising car tariffs from 15% to 25%, if EU levies on US industrial products are not cut to zero. The automotive sector is the main pressure point. The Commission reports "good progress", but the European Parliament still sees "some way to go", keeping timing risks elevated. Separately, Trump's 10% tariffs under section 122 were ruled unlawful by a US trade court, underlining ongoing legal constraints on his unilateral tariff agenda from not only the IEEPA tariffs that the supreme court ruled against. For now, the ruling only directly covers the two companies that brought the case and the state of Washington, and it can still be appealed by the US Justice Department.

What happened yesterday

In Norway, Norges Bank (NB) hiked policy rates by 25bp to 4.25%. It was an interim meeting with only a press release, a brief policy assessment and minutes, but no report or rate path. Hence, the amount of new information was limited. However, NB provided more neutral guidance on the policy rate outlook compared to March. The decision was a big event risk for markets going into the decision with both markets and analysts split on an "unchanged" decision and a hike.

In Sweden, the Riksbank kept its policy rate unchanged at 1.75% as widely expected. The press release struck a balanced tone, suggesting that low spot inflation and somewhat sluggish growth in Sweden weigh against higher energy prices, elevated cost pressure and rising international inflation, such as seen in the euro area.

In the US, April's Challenger report showed job cuts of around 83k, as layoff announcements rose from 61k in March, in contrast to the decline seen recently in jobless claims. AI is accounting for a growing share of announced job cuts: last year, less than 10% of all layoffs were attributed to AI in Challenger's statistics, whereas in both March and April the share exceeded 25%. US jobless claims increased less than expected amid low layoffs. The number of people receiving unemployment benefits fell by 10k to a seasonally adjusted 1.766 million in the week ending 25 April, taking continuing claims to their lowest level since early 2024. Meanwhile, Q1 flash productivity growth slowed as expected to 0.8% q/q AR from 1.8% in Q4 2025. Despite this, unit labour cost growth also slowed to 2.3%, which should be consistent with only 2% inflation.

In the UK, more than 5,000 council seats were up for grabs at local elections in England. The Scottish and the Welsh were also at the polls. Early results suggest the Labour Party is facing a big setback as expected, while Reform UK is on the rise. The Conservatives are also looking at a loss. Election results are being announced throughout today and some tomorrow. The big question for markets is whether the Labour setback will be so extensive that PM Starmer could be forced to resign, in which case we would expect another leg higher in Gilt yields.

Equities: Wednesday's over-excitement faded, with Stoxx 600 -1.1% lower and S&P 500 -0.4%. Energy heavy sectors underperformed, including materials and industrials at the bottom. Tech has been the standout in recent weeks. What's interesting is how the tech sector takes turn pulling in current markets. While the semis rally retreated -2% yesterday, in line with performance in other heavy cyclicals, software bounced 3.5% and thereby led the market. As such, tech and in the end, US has been a relative winner recently in risk-on and risk-off markets.

FI and FX

US and Iranian hostilities resumed overnight as Iran launched attacks on US warships, with the US responding by striking Iran military sites. President Trump however stated that the ceasefire is still in effect, while Iran says that the ceasefire has been broken. Brent crude briefly fell below USD97/bbl yesterday but has rebounded back above the USD100/bbl mark. Yields rose over the US session, with the 2Y UST at 3.91% and the 10Y UST at 4.39% and trading sideways overnight. EUR/USD continues range-trading just above 1.17. The US April Jobs Report is set to be released in the afternoon and recent labour market signals have generally been strong. We forecast NFP slightly above consensus at +80k, and unemployment rate steady at 4.3%, which could add some near-term support for broad USD. Also keep an eye out for the UK local election. Early results suggest the Labour Party is facing a big setback, which could add to pressures for PM Starmer to resign.

Norges Bank hiked policy rates by 25bp yesterday but also struck a slightly more neutral tone compared to that of the March meeting. We still pencil in the second and final 25bp hike to 4.50% in June, but we acknowledge that the probability has fallen with yesterday's decision, i.e. we might already have hit a peak in policy rates. The Riksbank left the policy rate at 1.75%. The statement struck a balanced tone, weighing the softer-than-expected inflation against risks of higher inflation going forward. Governor Erik Thedéen offered little forward guidance, with the board instead aligning around a statement weighing the (modestly) increased upside risks to inflation against the recent downside surprise in spot prints, concluding that the Riksbank is well positioned to await further data.