Forex
The strongest to the weakest of the major currencies

The AUD is the strongest and the JPY is the weakest as the NA session begins. The USD is mixed to lower thanks to declines vs the commodity currencies ahead of the US jobs report (the AUD, NZD and CAD) and after the passing of the US debt ceiling vote in the Senate.

U.S. stock futures are on the rise following the approval of a bill to raise the country's debt ceiling, as concerns eased about a potential default. The bipartisan approval, with 63 senators supporting and 36 opposing, will prevent the government from running out of money to repay its obligations once signed by President Joe Biden. The major indices all moved higher yesterday led by the Nasdaq.

This news, combined with the anticipation for the upcoming release of May's jobs report, has Wall Street on high alert, but hoping for the best. The jobs report is expected to show a slight decrease in job growth from last months 253K rise, and has high implications for the Federal Reserve's monetary policy. The market is now pricing mostly in no change in policy in June (around 20-25%) thanks to the "skip" comments this week (it was close to 70% earlier this week) This week, the debate on whether to hike or skip surfaced with Fed's Jefferson and Harper firmly in the skip camp.

The expectations for the jobs report shows:

  • Consensus estimate +190K (range +100K to +293K)
  • Private +165K
  • February +311K
  • March +236K
  • April +190K
  • Unemployment rate consensus estimate: 3.5% vs 3.4% prior
  • Participation rate prior 62.6%
  • Prior underemployment U6 6.6%
  • Avg hourly earnings y/y exp +4.4% y/y vs +4.4% prior
  • Avg hourly earnings m/m exp +0.3% vs +0.5% prior
  • Avg weekly hours exp 34.4 vs 34.4 prior

A review of the employment components in other indicators shows:

  • ADP employment 278K vs 170K expected. Much stronger
  • ISM manufacturing employment 51.4 vs 47.1 prior. Back above 50.
  • ISM services employment 51.3 vs 50.8. Stonger
  • Challenger Job Cuts +80.1K vs +67.0K prior. Shows one side.but weaker
  • Philly employment -8.6 vs -0.2 prior. Worse than expected
  • Empire employment -3.3 vs -8.0 prior. Still down but improved
  • Initial jobless claims survey week 225K vs 252K expected. Stronger.

Read Adam Button's preview HERE.

Meanwhile, oil prices have seen increases. OPEC+ meets this weekend with the meeting outcome unclear. Further output cuts are considered unlikely, according to two delegates cited by CNBC this morning. They suggested that OPEC+ would be comfortable with oil prices above USD 75 per barrel. Another source projected comfort with prices in the $70-$80 per barrel range. However, these projections assume that demand does not remain low in China, where recovery from COVID-19 restrictions has been slower than anticipated.

Central bankers in Europe expressed caution on inflation this today. The ECB's Makhlouf acknowledges the recent fall in Eurozone (EZ) inflation but emphasizes that it is not definitive, as underlying pressure remains strong. He anticipates another rate increase at the next meeting and indicates that they have not reached the point where they can consider stopping. His collegue Vasle, said that core inflation remains high and persistent requiring more rate hikes to reach inflation goals. Meanwhile, the SNB Vice Chairman Martin Schlegel expressed concern about inflation , stating that they cannot rule out further tightening to ensure price stability. The Vice Chairman also notes that inflation is spreading beyond energy and supply bottlenecks, indicating increasing signs of inflation in other areas. Both central banks are clearly monitoring inflation closely and considering appropriate measures to address it.

A snapshot of the markets are showing:

In the premarket of US stocks the major indices are higher adding to their gains from yesterday. The major indices are marginally higher this week (assuming the Dow Industrial Average rises today):

  • Dow Industrial Average is up 171 points after yesterday's 153.30 point rise
  • S&P index up 21.25 points after yesterday's 41.17 point rise
  • NASDAQ index is up 82 points after yesterday's 165.70 point rise

In the European equity markets, the major indices are higher in morning European trading. The major indices are mixed this week

  • German DAX +1.11%. For the week the index is up 0.29%
  • Frances CAC +1.23%. For the week the index is down -1.29%
  • UK's FTSE 100 up 0.97%. For the week the index is down -0.4%
  • Spain's Ibex up 0.95%. For the week the index is up 0.70%
  • Italy's FTSE MIB up 1.05%.

In the US debt market, US yields are marginally higher. Yesterday yields moved lower

  • 2-year yield 4.336%, -0.4 basis points
  • 5-year yield 3.702% +0.2 basis points
  • 10-year yield 3.604%, -0.3 basis points
  • 30-year yield 3.824%, -0.9 basis points

In the European debt market, benchmark 10 year yields are mostly higher:

europe
European benchmark 10 yields are mostly higher