This Week: Solid US jobs data should support the flagging dollar

Alpari

The familiar US themes of rising price pressures, monetary policy and growth concerns continue to dog the market.

Market participants will be scouring for fresh clues pertaining to those themes from the following scheduled economic events and data releases in this holiday-shortened week:

Monday, 30 May

EUR: Germany CPI and Eurozone consumer confidence
US markets closed for Memorial Day holiday

Tuesday, 31 May

CNH: China PMI
EUR: Eurozone CPI
CAD: Canada March GDP
USD: US consumer confidence

Wednesday, 1 June

CNH: China Caixin PMI
CAD: Bank of Canada rate decision
EUR: Eurozone unemployment, ECB President Christine Lagarde speech
USD: Fed balance sheet roll off begins; Fed speeches by New York Fed President John Williams and St. Louis Fed President James Bullard

Thursday, 2 June

EUR: Eurozone PPI
USD: US initial jobless claims, Fed speech by Cleveland Fed President Loretta Mester
Brent: Virtual OPEC+ Ministerial meeting
US crude: US EIA inventory report
UK markets closed for Spring Bank Holiday

Friday, 3 June

USD: US employment report
EUR: Eurozone retail sales, Markit services PMI
UK markets closed for Queen Elizabeth II Platinum Jubilee

This week’s highlight is the monthly US jobs report which is expected to remain resilient.

Wall Street forecasts point to 325,000 jobs added in the US labour market in May, with the unemployment rate falling to the pre-pandemic low of 3.5%.

Ultimately, the firm jobs market should continue to support hawkish expectations, the consumer and the dollar. A weak report would see the greenback sell off and risk markets go higher as it is more likely there will be less of a need for aggressive action by the Fed.

Note that US bond yields have fallen from their recent highs amid fears that the world’s largest economy is headed for a recession. In turn, the dollar has lost its medium-term support from previous-wide rate differentials. The greenback fell for a second consecutive week, the first time this has happened this year.

Solid US jobs data should support the flagging dollar

With all that in mind, markets are still set on two 50bp interest rate hikes at the next couple of Fed meetings.

However, it is what happens beyond this and the summer which is taxing the minds of investors. Policymakers will have a raft of the latest data to assess and decide if additional big rate moves are required. Traders are looking to see if the economy is rolling over, with softer data now printing more frequently.

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