US: Payrolls in focus with the FOMC side-lined for now - MUFG

Derek Halpenny, European Head of GMR at MUFG, suggests that it’s the first Friday of the month, so we all know what that means!

Key Quotes

“Our internal model estimate for today’s nonfarm payroll print for July is 214k – so above the consensus in the market, which Bloomberg has at 180k. A figure around consensus or our estimate would confirm that the 11k print in May was a one-off and that the true trend in job gains is perhaps coming down, but still something between 150K-200K.

A consensus print is unlikely to fuel considerable price action although it would confirm the further removal of excess labour market capacity that the FOMC has referred to and would therefore keep December very much alive in terms of timing for the second rate increase. 

While that won’t necessarily excite the rates market today, from an FX perspective it would be a strong enough employment report to highlight the divergence with other major economies at present. The wave of central bank easing globally continues. The BoJ last week, the RBA and BoE this week, the RBNZ next week, followed perhaps by the ECB and Norges bank in September. While the US dollar has performed poorly of late given the actions from these central banks, the scope for continued dollar selling appears limited to us.”