The US employment report will be crucial in setting the market tone ahead. With expectations for a move this year only around 10%, it’s a tall order to put it back on the table, especially with the more uncertain global backdrop created by the UK’s vote for Brexit. The market looks for a rise of 180k on headline payrolls from the 38k increase see previously. The unemployment rate is seen ticking higher to 4.8% from 4.7% previously. The Fed has made it pretty clear that the rate outlook is data dependent, but it’s hard to see the jobs market recovering enough to put a rate hike back on the table. The question will be, post data, do the two months combined show a slowing job market, i.e. beyond the inevitably noise in the monthly releases.
Trading ahead of the numbers likely to be fairly constrained. Many of the major pairs are in consolidative territory at the moment, sterling up from the lows seen mid-week, the Aussie the same, CAD in a wedge pattern, the euro seeing tightening ranges above the 1.10 level on EURUSD. Gold is a different story, with the push above the 1350 level holding in place for the time being. Bonds also continue to make new cyclical lows in many markets on a nearly daily basis. We continue to live in extraordinary times.