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Markets await US jobs report as potential catalyst to rate cut

All eyes are on US non-farm payroll data as bets the Fed would have to cut interest rates are high.

Centtrip: Markets await US jobs report as potential catalyst to rate cut

Markets are subdued as traders are holding off to make big bets ahead of the US non-farm payroll report that could affect the course of the Federal Reserve’s monetary policy.

The Dollar Index, measuring the greenback against a basket of six major currencies, little changed at 96.748, having spent the previous day in a tight range as the US financial markets were closed for the Independence Day.

The Dollar has been moving closely in correlation with US yields. Some analysts suggested that the bond market rally might have gone too far and its reaction to the jobs data could be volatile. US Treasury yields have slumped to two-and-a-half-year lows on expectations that the Fed would cut interest rates this year, starting as early as this month.

Today’s US employment data will either make or break the case for a rate cut in July.

Economists expect 165,000 jobs were added in June, after a disappointingly low number of 75,000 new positions in May. The unemployment rate is expected to have held steady at 3.6 per cent, while average hourly wages are anticipated to have increased by 0.3 per cent, or 3.2 per cent year over year – up from 3.1 per cent in May.

However, ADP’s private payroll report published on Wednesday, 3 July showed that only 102,000 new additions, having dampened expectations for the non-farm payroll report due for release at 13:30 (GMT).

The Fed monitors the jobs report closely when deciding on the direction of its monetary policy. If jobs and wage growth shows more signs of weakness, it could add fuel to interest rate cut discussions when the US central bank meets this month.

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