cable intraday d

The US dollar has grinded higher in the past hour, even as risk assets add to gains. The S&P 500 is now up 1.3% on the day and even with that, cable is down 41 pips.

The market generally sees the US employment report as strong but there's been no change in the 29% implied odds of a June hike. CIBC foreasts a final Fed hike in July but the market has priced in just 17 bps of hiking at that meeting with many seeing the likelihood of further economic deterioration between now and July 26.

CIBC noted that the household survey tends to be more volatile and less reliable month-to-month and the 310K drop in jobs was a stark contrast to the establishment survey at +339K. However, year-to-date comparisons suggest the household survey has added 1.9 million jobs compared to 1.6 million in the payroll report, indicating the May report could be a correction for previous over-reporting. The total participation rate remained constant, while the prime-age (25-54 years) participation rate exceeded its pre-pandemic peak. They say the latter trend may persist as Americans with depleted savings and affected by inflation might be prompted to seek income.

The upside surprise in hiring was in line with increase in job openings seen leading up to the reference period of this survey. Although there was some weakness beneath the surface of the report, the tone of recent data suggests that the US was still on pace for something close to 2% growth in Q2, yet another quarter in which we've put off the necessary pain to get inflation down all the way to 2%. The ambiguity in today's data should be sufficient to have the Fed opt to keep rates on hold in June, but we now see them nudging rates up a final time in July. We're near the end of a long rate hike cycle, so each hike is now a separate decision that will rest on the incoming data, and a Q3 slowdown is necessary to still make July an isolated final move rather than part of a sequence.

In a separate note, BMO highlighted that any time the unemployment rate rises 0.3 percentage points from the low, it tends to rise a further 1.5-3.0 percentage points.