Share:

Outlook

Today’s payrolls is clearly the market-mover. Estimates range from 335,000 to 1 million, according to Bloomberg, with the ADP private sector estimate at 978,000 (but ADP lacking credibility after last month’s epic fail). The consensus remains about 650,000.

A good claims number yesterday was priced in, but nevertheless a knee-jerk reaction pushed yields and the dollar up when the number was a bigger than expected surprise. We have to consider whether today’s payrolls can deliver a second surprise and thus a second price bump. What if the NFP is under the consensus (650,000) or should we be looking at the ADP (978,000)?

The probability of a disappointment (under 500,000) is low but not zero. As noted above, we are already getting a flood of “explanations” about the curious case of the low labor supply when there are 8 million-plus jobs still to be recovered and demand for labor is high.

From a technical perspective, the question is whether any of the price moves yesterday constitute a breakout. We are inclined to the view that one day’s data hardly ever signals a reversal. We want confirmation. Having said that, while we are not getting a taper tantrum in bonds, we are seeing divergence in market vs. Fed expectations for talking about tapering and thus the end-point. See the splendid chart from Gittler at BDSwiss, which captures the issue in one fell swoop. Weirdly, you can have falling inflation expectations and still have rising taper/rate hike expectations as long as the job market is closer to full recovery than we thought only two days ago.

fxsoriginal

Will the Fed require all 8 million to get re-employed? That seems silly. How about half, or 4 million? Let’s assume that 4 million new jobs represent the “substantial further progress” that the Fed requires. Can we get 4 million newly employed by the time of the September FOMC? Yes. That would mean tapering to the point of a hike in the Fed funds rate about one year from now. If not sooner.

One “good” thing to come out of this Event in that the market believed the Fed that inflation will be transitory and also that its priority is the jobs market. It’s not yet clear that the market has absorbed some of the Fed’s nuances–that job growth has to include minorities and be accompanied by decent wages.

Inflation Tidbit: Remember yesterday’s sticky vs. flexible prices from the Atlanta Fed? This time we have Covid-sensitive prices vs. Covid-insensitive from the San Francisco Fed. So far, so good. Then there is the Cleveland Fed’s trimmed mean CPI, which removes volatile prices to get underlying inflation. The report in the NYT quotes a JP Morgan economist who says we can make it even simpler--just look at rents. The “rental component of C.P.I. (as well as the ‘owner’s equivalent rent’ category, which measures housing costs for homeowners) is the largest single item in the overall price index, and should be less affected by the pandemic than some other categories. If rents start to rise rapidly beyond a few hot markets, overall inflation could follow.” As it happens, we do have rental inflation but only in some hotspots, and it’s already receding in places like San Francisco.

fxsoriginal


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.

To get a two-week trial of the full reports plus traders advice for only $3.95. Click here!

Share: Feed news

This morning FX briefing is an information service, not a trading system. All trade recommendations are included in the afternoon report.

Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended Content


Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended Content

Editors’ Picks

AUD/USD bulls eye 0.6660 resistance confluence and RBA Interest Rate Decision

AUD/USD bulls eye 0.6660 resistance confluence and RBA Interest Rate Decision

AUD/USD bulls take a breather around 0.6620, making rounds to a two-week high amid Tuesday’s sluggish session as Aussie pair traders await the Reserve Bank of Australia’s (RBA) Interest Rate Decision. The quote remains sidelined after rising in the last three consecutive days.

AUD/USD News

EUR/USD struggles to defend corrective bounce off 1.0700

EUR/USD struggles to defend corrective bounce off 1.0700

EUR/USD retreats towards 1.0700 amid the early hours of Tuesday’s Asian session after a volatile day. That said, the Euro pair initially cheered the downbeat US data before paring the gains and closing the day around the week-start levels.

EUR/USD News

Gold grinds higher past $1,950 amid downbeat United States data

Gold grinds higher past $1,950 amid downbeat United States data

Gold stays on the front foot aroud $1,961, after an upbeat start of the week, as the bullion traders seek more clues to extend the latest rebound during early Tuesday in Asia. The precious metal cheered downbeat United States statistics and dicey markets to regain upside momentum the previous day.

Gold News

TRX, ADA price fall over 5% as Tron and Cardano founders show support for Binance and CEO

TRX, ADA price fall over 5% as Tron and Cardano founders show support for Binance and CEO

Tron (TRX) and Cardano (ADA) prices are down by more than 5% each as the two altcoins follow in the footsteps of Binance Coin (BNB), which fell 10% after the US Securities and Exchange Commission (SEC) filed a civil complaint against Binance and CEO Changpeng Zhao (CZ).

Read more

Reserve Bank of Australia Preview: AUD/USD ready for another hike? Premium

Reserve Bank of Australia Preview: AUD/USD ready for another hike?

The Reserve Bank of Australia (RBA) is set to announce its monetary policy decision on Tuesday, June 6 at 04:30 GMT. The market consensus is for the central bank to keep its monetary policy unchanged.

Read more

Majors

Cryptocurrencies

Signatures