May NFP Misses Headline – Focus Moves To ECB, RBA, FOMC


Talking Points:

– May Non-Farm Payroll numbers came in below-expectations, with negative revisions for both April and March. Average hourly earnings increased by .2% for an annualized rate of 2.5%.

– This has created another gust of weakness in the Greenback, and with a very busy next couple of weeks, we can certainly see volatility around this theme hasten.

This morning saw the release of the last NFP report before the Fed goes into their two-day policy meeting on June 13th/14th. The headline number missed, printing at +138k versus the expectation of +182k. April NFP was revised-lower to +174k while March was revised down by -29k for a finalized total of +50k. Average hourly earnings were up .2% in the month of May, bringing the annualized total to 2.5%. So, while this morning’s numbers aren’t great by any stretch, this is likely not enough to derail the Fed’s rate hike plans for the middle of June. A hike is largely expected at that meeting, and given the bank’s prior stance towards slower data being ‘transitory’, this morning’s NFP miss may not have done enough to alter those rate hike plans. For its part, the U.S. Dollar has stayed incredibly weak since the middle of May, and this hastened after this morning’s NFP print as DXY moved down to set another fresh six-month low.

May NFP Misses Headline - Focus Moves to ECB, RBA, FOMC

Chart prepared by James Stanley

Next Week’s Calendar is Loaded with Event Risk

Looking ahead to next week: The economic calendar is fairly full and there are a couple of pivotal non-data related events to watch out for. Thursday of next week should be especially brisk, as we have the European Central Bank rate decision in the morning, followed by the James Comey testimony in front of the Senate Intelligence Committee at 10AM ET, and the U.K. will be going to the polls throughout the day for early general elections. And in the week after, we have a Federal Reserve meeting where expectations are high for another hike from the Fed. This flurry of events can keep volatility high in Euro,GBP, and USD; and we’ll likely see markets attempting to price-in any anticipation ahead of time, much like we saw with this week’s GBP sell-off after a Yougov poll showed that Theresa May’s Tories may not garner the supermajority that she had originally hoped.

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