Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Can The U.S. Jobs Report Maintain The Fed-Engineered Calm?

By XM Group (Trading Point )ForexJun 30, 2021 07:56AM ET
www.investing.com/analysis/can-the-us-jobs-report-maintain-the-fedengineered-calm-200589063
Can The U.S. Jobs Report Maintain The Fed-Engineered Calm?
By XM Group (Trading Point )   |  Jun 30, 2021 07:56AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

As speculation about the Fed’s next course of action reaches fever pitch, attention will turn to the latest nonfarm payrolls report on Friday (12:30 GMT). The all-important jobs data could set the tone for the summer as investors prep for possible taper signals at August’s Jackson Hole symposium. With inflation soaring, the not-so-hot labour market has been the Fed’s main rationale for putting off the start of taper discussions. Progress in the jobs recovery is seen as paramount for greenlighting the process. However, the June report may not change much in terms of how fast the jobs market is recovering, meaning the US dollar could stay rangebound.

Yield gyrations settle down

It’s been a tumultuous month for bond markets as the benchmark 10-year Treasury yield whipsawed twice on flipflopping views on how soon the Federal Reserve will begin to pull back its colossal pandemic stimulus. Things settled down somewhat last week, however, after Fed Chair Jerome Powell reiterated that the surge in inflation will likely be transitory – a view that seems to be supported by a majority of FOMC members even though some policymakers have grown more wary lately about the risks of high inflation becoming stickier.

Markets haven’t totally unwound bets of an earlier-than-expected rate hike either, as Fed fund futures point to more than 70% odds of a rate rise by December 2022 and short-term yields remain near their post-FOMC meeting highs. The flatter yield curve reflects easing concerns about more aggressive rate increases in the longer-term as the Fed is signalling it could move early should inflation not fall back as expected.



Low probability for big upside NFP surprise

In the meantime, the downward trend in 10- and 30-year yields is shoring up the post-pandemic risk rally in equity markets, while the US dollar has appreciated substantially since the last FOMC meeting along with short-term yields. It’s doubtful whether Friday’s jobs numbers will add anything new to this narrative as it’s again not looking very likely that there will be a big bounce in new payrolls.

Weekly jobless claims ticked slightly higher in mid-June, ending six straight weeks of declines, but more importantly, survey data indicate labour shortages have continued through June, with firms unable to fill vacancies. The ISM manufacturing PMI on Thursday should shed further light on the hiring situation during the month.



Nonetheless, analysts polled by Refinitiv are forecasting a slightly stronger NFP print for June, predicting a gain of 690k jobs versus 559k in the prior month. The unemployment rate is projected to have dropped slightly to 5.7%, while wage growth is forecast to have accelerated in June, with average hourly earnings rising by 3.6% year-on-year.

An upside surprise in wage growth is possible given the ongoing constraints faced by businesses in finding staff. However, this would also likely be seen as temporary as the worker shortages are expected to ease in September when the extra federal unemployment benefits expire.



Dollar/yen eyes jobs boost for fresh highs

The US dollar could get a broad boost from better-than-expected nonfarm payrolls numbers but is most poised to climb to fresh peaks against the Japanese yen, which remains pressured by the Bank of Japan’s yield curve control policy. The pair recently brushed a 15-month high of 111.11, which could come back under the spotlight from positive economic indicators. Higher up, the March 2020 peak of 111.70 might be targeted by USD bulls before aiming for the 161.8% Fibonacci extension of the April downleg at 113.12.



If on the other hand the jobs figures disappoint, dollar/yen may initially slip towards the 78.6% Fibonacci retracement of 110.21, while a sharper selloff could see the losses extend until the 50-day moving average near 109.45.

But in the event that the NFP report fails to produce any shocks, there’s a good chance the dollar index will end up consolidating between 91.50 and 92.50 over the next few weeks as investors await fresh clues from the Fed, which are anticipated to come at the annual Jackson Hole symposium on August 26-28.

Can The U.S. Jobs Report Maintain The Fed-Engineered Calm?
 

Related Articles

Scott Barkley
AUD/USD Channel Trade By Scott Barkley - Sep 21, 2021

Bearish:USDX is headed down at the time of this post. Currently we are at 1.7247. Aussie Monetary minutes were considered not good. We are looking for a continuation to the ATR...

Can The U.S. Jobs Report Maintain The Fed-Engineered Calm?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email