The first Friday of June brings with it the release of US employment data, including non-farm payrolls and average hourly earnings which are always eagerly anticipated, but even more so with the highly data-dependent Federal Reserve.
It seems Powell and his colleagues had been concerned recently by their failure to ratify market rate cut expectations as this could have seen a reversal of desirably low rates. In which light, the Fed Chair signalled on Tuesday that it may be prepared to cut rates to sustain growth. His comments were then echoed by his number two, Clarida, who said if the central bank senses growth slowing, they will act to maintain growth at potential.
This is certainly a dovish tilt from the previous message from the last FOMC meeting which stated that the Fed didn’t see ‘a strong case for moving in either direction’ on rates.
Regarding the data releases, we’ve had mixed signals for employment so far this month. ADP Private sector jobs printed the fewest since 2010 whilst the service-industry gauge topped forecasts amid a rebound in employment. We think it’s important to note that a major reason why jobs growth is moderating in the US may be due to a shrinking pool of available labour, not because job openings don’t exist.
This should ordinarily exert upward pressure on wages which in turn may cause some re-pricing of the 'overpricing' of the Fed rate cuts, as Goldman Sachs has labelled it, and a bounce in the dollar.
See below for the key numbers to know ahead of the release tomorrow at 13.30pm (GMT+1):
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