Ok, here comes payrolls.
As usual, the focus will be on average hourly earnings, which have (generally speaking) dictated trading after the last six employment reports. The story is the same as it ever was against a backdrop of (basically) full employment but still subdued inflation: the market is looking for signs that wage growth is picking up while the actual headline payrolls print has been relegated to also-ran status.
Here’s what everyone was expecting:
Coming in, the dollar is still struggling to shake off what turned out to be its worst year since 2003. Upbeat global economic data and doubts about the extent to which the tax bill will actually deliver when it comes to boosting the greenback continue to weigh. As far as commodities go, it’s possible the tail is now wagging the dog in terms of the rally exacerbating dollar weakness. Headed into payrolls, the dollar did stage a bit of a bounce, so we’ll see how it plays out.
In Treasurys, you know the story. The curve continues to flatten and the debate rages about what that’s signaling for the economy. One thing seems certain: the market isn’t nearly as optimistic about the outlook for the U.S. reflation narrative as it was this time last year.
Among the factors Goldman says argue for a stronger December report:
