US Dollar: Softer jobs and inflation outlook weigh on rate expectations – Commerzbank

Commerzbank’s Bernd Weidensteiner highlights that US nonfarm payrolls rose only 57,000 in June, far below consensus, with prior months revised down by 74,000. Monthly job growth has been slowing and the six-month average is expected to turn lower. Nonetheless, slower labor force growth keeps the unemployment rate at 4.2%, while falling Oil prices point to slightly lower consumer prices in June.

Weak payrolls temper Dollar rate story

"Employment trends in June fell short of expectations. Only 57 thousand new jobs were created—roughly half as many as expected. In addition, payrolls for the previous two months have been revised downward by a total of 74,000 (this revision takes into account newly calculated seasonal factors as well as late reports from companies and government agencies, which provide a more complete picture)."

"Monthly job growth has been slowing again for several months. The six-month average, which smooths out the volatility of the figures, is therefore likely to turn downward again soon."

"However, given the significantly slower growth in the labor force, even gains on the scale seen in June are sufficient to prevent an increase in the unemployment rate."

"The job numbers, which fell short of expectations, are likely to put an end—for now—to the discussions about a short-term interest rate hike by the Fed that have flared up repeatedly in the meantime. In addition, inflation is also expected to ease again. The sharp drop in oil prices is already providing relief at the gas pump. "

"Consumer prices are likely to have fallen slightly in June. Thus, the key data—which, according to Fed Chairman Warsh, market participants should rely on when assessing the trajectory of the federal funds rate—do not support an interest rate hike at the meeting in late July. We see this as confirmation of our assessment that the Fed will hold rates steady this year."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)