The Fed's first interest rate cut in over ten years has trumped the monthly US non-farm payrolls report in some respects. However, it is still an extremely important barometer of the US economy and will have, as ever, a significant bearing on the monetary policy outlook.
Last month, nonfarm payrolls increased 224,000, though May hiring was downgraded by 3,000. A headline print in line with the six month average is expected this month, around 165k.
With confidence strong and the consumer sector buoyant, as seen by the recent Q2 GDP data, the labour market remains very tight. Unemployment remains near 50-year lows and wages are grinding higher.
Indeed, the FOMC confirmed this view on Wednesday after its 'insurance' rate cut as the labour market was still described as 'strong' and activity is still expanding at a 'moderate' rate. Moreover, the Fed’s base case remains that 'sustained' growth, a 'strong' labour market and inflation near the 2% target 'are the most likely outcomes'.
The Fed also repeated in its statement that it 'will act as appropriate to sustain the expansion', which some analysts are interpreting as an easing bias which suggest more rate cuts may come. However, it was clear that the FOMC will not pre-commit to further cuts and the move is a 'mid-cycle policy adjustment' which was seen as hawkish and left markets disappointed.
The USD has reacted strongly, rocketing higher and breaking some key levels in most of the majors. The trade weighted dollar (DXY) cleared the 98.35 resistance and is now trading at its highest level since May 2017. Interestingly, the US yield curve flattened, which probably wasn't Powell's intention and these two market moves do signal a market that is wanting more monetary policy accommodation.
See below for the key numbers to know ahead of the jobs release tomorrow at 13.30pm (GMT+1):
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