Last Friday, the US NFP missed consensus coming in at 175K vs. 243 expected with the unemployment rate ticking higher to 3.9% vs. 3.8% expected. Moreover, the average hourly earnings surprised to the downside with the Y/Y growth rate coming in at 3.9% vs. 4.0% expected and the M/M figure at 0.2% vs. 0.3% expected. Overall, it was a soft report but not bad. As a consequence, the market increased the rate cuts pricing with futures implying basically two rate cuts now by the end of the year with the first one coming in September. We might have reached peak hawkishness in the short term with even Fed's Bowman tuning down a bit her tone following the labour market report.

The ISM Services PMI data released after the NFP made things a bit murkier as the index missed by a big margin falling back in contraction for the first time since December 2022 and the price paid sub-index jumping to 59.2 vs. 53.4. Unfortunately, the survey has been giving some false signals in this cycle but overall it's hard to see a real re-acceleration in inflation with a softer labour market and falling wage growth. To sum up, the data didn't really give much conviction to either side, but it did alleviate the hawkish sentiment for the time being.