Market participants are keenly awaiting a crucial US jobs report likely to influence the Federal Reserve’s policy outlook. The dollar remained steady, while Treasury yields inched higher. Traders have intensified their bets on rate cuts in the past week, spurred by softer-than-expected US economic data and recent policy easing by the Bank of Canada and the European Central Bank.
The upcoming report is anticipated to reveal that the US added 180,000 jobs in May, with the unemployment rate remaining unchanged. Earlier data this week included higher-than-expected jobless claims and lower-than-previously reported labor costs. Swap markets are pricing in a full Fed rate cut by November, with a strong likelihood of one in September.
We expect the overall message from the nonfarm payrolls report to be one of strength. This could potentially delay market expectations for the FOMC’s first rate cut in September, providing modest support for the US dollar. Meanwhile, oil prices rose on Friday, heading for a third consecutive gain, as diminishing expectations of an oversupply by OPEC and its allies buoyed the market. Gold remained steady.