EUROPEAN SESSION

In the European session, we don’t have much on the agenda other than a couple of low tier releases like Spanish industrial production and Swiss consumer confidence. None of the data is going to change anything for the respective central banks, so the market reaction will be muted.

AMERICAN SESSION

In the American session, we get the Canadian jobs data, the US NFP report and the University of Michigan Consumer Sentiment survey. Canada is expected to add 10K jobs in April vs 14.1K in March and the unemployment rate is seen remaining unchanged at 6.7%.

The BoC said in the monetary policy statement that “the labour market is soft, with subdued employment growth over the past year and job losses in sectors targeted by US tariffs. The unemployment rate remains in the 6½%‑7% range, reflecting both weak hiring and fewer job seekers”.

The focus now is mainly on the US-Iran war as Governor Macklem said that persistently higher energy prices could require rate hikes.

The US NFP is expected to show 62K jobs added in April vs 178K in March and the unemployment rate to remain unchanged at 4.3%. Average Hourly Earnings Y/Y is expected at 3.8% vs 3.5% prior, while the M/M metric is seen at 0.3% vs 0.2% prior.

The US jobs data has been consistently surprising to the upside for quite some time and the latest US jobless claims showed once again that the labour market is getting better and better. This tightening amid elevated energy prices, stock market at all-time highs and the fact that the Fed has been missing the 2% target since 2021 might not bode well for the future.

There’s a scenario where the war ends, the Strait of Hormuz gets reopened and oil prices fall to pre-war levels. In such a scenario, the market will likely price in rate cuts for the Fed on lower inflation worries, exacerbating the easing in financial conditions.

This could lead to increased economic activity that keeps inflation higher for longer or worse, it leads to an even faster tightening in the labour market and higher wages, eventually requiring rate hikes anyway. This would set the stage for the next crash in the stock market and strong rally in the US dollar as the Fed is forced to hike.

Fed’s Hammack yesterday said this “I hear concerns among businesses that an inflationary mindset is starting to become entrenched in people’s minds”.

CENTRAL BANK SPEAKERS

• 07:05 GMT/03:05 ET – ECB’s de Guindos (neutral – voter)
• 09:45 GMT/05:45 ET – Fed’s Cook (neutral – voter)
• 16:00 GMT/12:00 ET – ECB’s Schnabel (neutral – voter)

This article was written by Giuseppe Dellamotta at investinglive.com.



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