Interesting thoughts from Bank of New Zealand on the nonfarm payroll report due 1230GMT on July 5.

BNZ preamble with these two scenarios:

  • Even a strong payrolls report is unlikely to deter the Fed from cutting rates at its meeting later this month it seems, although expectations for a 50bp move will likely be pared back.
  • A weaker than expected result will surely see heightened expectations that the Fed will commence its easing cycle with a 50bp move (the market prices 33bps at present).

And add (bolding mine):

Recent equity market reactions suggest we might be moving back into a world where 'bad news is good news',

  • if the market interprets weaker data as increasing the chances of more aggressive monetary policy easing.
  • This environment can plausibly persist as long as the market perceives the Fed's actions as likely to reduce the risk of a major economic slow-down and avert recession.

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Note that with markets in the US closed on July 4 for the holiday many have taken the opportunity to slink off for a long weekend (taking Friday off). This will think liquidity across US markets for Friday trade which is likely to see any moves exacerbated. For equity traders the most recent background is summed up from Wednesday (bolding mine again):

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Earlier:

jerome powell

His middle name is "MINE!"