There's no market moving data in the European session (unless we get a big jump in the Eurozone unemployment rate). For this reason, we will likley see a rangebound price action heading into the US NFP release and the ISM Services PMI. In the big picture nothing has changed, therefore we need something that could change the current expectations to trigger a more sustained market reaction. The market is debating on two possible scenarios:

  • Growth with slow disinflation to target and eventually the Fed cutting rates.
  • Inflation stuck above target or a reacceleration with the Fed forced to eventually hike.

Today's data could change or reinforce those expectations in the short term. So, what should we look out for.


The US NFP report is expected to show 243K jobs added in April vs. 303K in March with the Unemployment Rate seen unchanged at 3.8%. The Average Hourly Earnings Y/Y is expected at 4.0% vs. 4.1% prior, while the M/M figure is seen at 0.3% vs. 0.3% prior. The expectations are for good numbers given that all the other jobs data we got so far was strong. The only "weak" reading came from the Present Situation Index in the US consumer confidence report. That generally correlates with the unemployment rate, so we might see a tick higher to 3.9% but it shouldn't be such a meaningful development given that the range of expectations is between 3.8% and 3.9% anyway.

The main focus should be on the Average Hourly Earnings as a resilient labour market with falling wage growth is good for growth and inflation. On the other hand, if we were to get a hot report all around, then the market would take that as hawkish stuff. In fact, we already saw the market getting scared by the hot US Q1 ECI report, so if we see again hot data on the wages side, the market should take that as bad news for inflation going forward.

It goes without saying that if we see bad figures all around, it would be a major surprise and the market will likely price back in more rate cuts and might even go into risk off as fears of recession could resurface.

US Unemployment Rate
US Unemployment Rate


The US ISM Services PMI is expected at 52.0 vs. 51.4 prior. Last month, the index missed expectations with some general weakness in the sub-indexes, especially the prices component which fell to the lowest level since March 2020. The latest S&P Global US Services PMI missed expectations. The commentary has been downbeat with even mentions of strong layoff activity, although there was also good news on the inflation front. The ISM Manufacturing PMI though diverged with the S&P Global PMIs as the data missed expectations slightly but the commentary was generally positive and it showed a big jump in prices paid index and the employment component ticked higher.

The main focus should be on the prices and employment components. If you recall, we got a strong dovish reaction last time when the prices index dropped to the lowest level in 4 years. If we get another drop or at least not a big change from the current levels, then the market might take that as good news for inflation and even if the headline number beats, it could lead to a positive risk sentiment. This will of course need to be paired with the US NFP report.

Conversely, if we see a jump in prices paid, it could lead the market to think that the last month's number was just a blip (it happened already with the employment number back in January) and trigger a hawkish reaction.

US ISM Services PMI
US ISM Services PMI