US JOLTS data in focus as we build towards Friday’s payrolls release

European markets are on the front foot in early trade despite continued political uncertainty in France. Michaele Barnier looks set to face a vote of no confidence after using legislation to force through a social security budget that will likely see the both the right and left wing parties unite in a bid to remove the PM in the coming days. With the French public deficit likely to have risen to 6% this year, the plan to drive it back down to 5% in 2025 looks likely to come into question given the fact that France could head into 2025 without an agreed budget. For markets, the continued economic and political jitters seen throughout the region provide further cause for EUR weakness, with EURGBP currently on track for its sixth down day today.

The optimism seen throughout equity markets comes off the back of an incredibly welcome ISM manufacturing PMI report out of the US yesterday. Despite growing fears that Donald Trump’s tenure could spark a resurgence in inflation pressures, the sharp collapse in the manufacturing ‘prices paid’ metric brought the second lowest reading this year (50.3). Not long-ago markets were using the weakness of the ISM manufacturing PMI as the basis of calls of an impending recession. However, with the latest PMI reading rising to a four-month high of 48.4, yesterday’s report provided a welcome mix of falling inflation fears and increased hope that Trump’s Presidency will provide the basis for a manufacturing recovery.

Looking ahead, today marks the beginning of a four-day period where US jobs move front and centre for traders, with the JOLTS job openings expected to improve after last month saw the worst reading in over three years. However, the big focus will be on the resolution of last months curious scenario where ADP payrolls soared from 159k to 233k, while the official NFP figure collapsed to a three-year low of 12k. With the market reaction to that payrolls figure highlighting a confidence that it is simply a temporary reaction to non-economic factors such as hurricanes and strikes, the ability to bounce back will be key this week.