Fundamental backdrop in USD
The upcoming Non-Farm Payrolls (NFP) report scheduled for release on Friday is expected to provide crucial insight into the current state of the US labor market, as well as influence the Federal Reserve’s impending decision regarding interest rates later this month. Presently, money markets have priced in a 70% probability of a rate hike hold, following statements from Fed speakers emphasizing a ‘wait and see’ approach. However, a robust NFP release has the potential to disrupt current market expectations and shift towards a more neutral stance.
CURRENTS FOR IMPLIED FED FUNDS
Current estimates suggest a slight decrease in both the non-farm payroll (NFP) and unemployment figures. However, this does not necessarily indicate a weakening labor market. The projected marginal decrement is not significant enough to detract from the labor market’s strength. Attention will also be directed towards the average earnings metric, which has been consistently declining but remains an important factor contributing to the high inflation levels in the US, especially given the economy’s focus on service industries.