But private American payrolls data from ADP – which traders have often believed serves as an indicator for the NFP result – delivered a big miss this week. Markets are now bracing for another soft jobs number. The Federal Reserve has already paused its plans to continue hiking rates, with the dot plot shifting lower and markets already pricing in odds of a rate cut this year. Another set of dire jobs numbers, combined with pressure from the White House to begin cutting rates straight away, could make it hard for the Fed to avoid committing to a much more dovish policy trajectory.
Just keep an eye on wage growth – a tight labour market should be delivering strong pay increases. A solid performance here could soften the blow of any downside surprise in the jobs numbers, especially as a late-stage economy will naturally struggle to keep adding jobs. A 49-year low for US jobless claims in the previous week also suggested that the labour market remains on good form.
GBP/USD is holding firm just below $1.3100, with traders reluctant to bid sterling higher despite the news that Theresa May has requested another Brexit extension. This time the UK is seeking to push back the official exit date until June 30th. The past week has been a good one for those betting against a no deal exit – cross-party talks and a further delay have both cut the odds of a hard Brexit.
However, there are two reasons not to get too optimistic on sterling.
Firstly, sterling so far has been largely unperturbed by the significant risk of a no deal before this week’s developments, so optimism is largely priced into cable already.
Secondly, May and Corbyn might be able to reach a consensus, but given the leaders’ strenuous relationship with their respective parties, there is still no guarantee that even a joint deal can make it through Parliament.
This delay is unlikely to go down well with Brexiters, especially as it means fielding candidates in the European Parliamentary elections – expect there to be little goodwill in Parliament towards May and her new deal.
Equities are similarly shielded from the latest tailwinds by the proximity of NFP figures. President Donald Trump yesterday stated that a trade deal with China could be concluded within four weeks, with President Xi Jinping calling for talks to conclude earlier.
Global equities are soft for now, but are still on track to close on a solid footing. The STOXX 600 index is on track for its best performance in almost three weeks, while the DAX hasn’t fared this well since December 2016. Gains for the S&P yesterday saw the index notching the first six-day winning streak since February 2018.
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