Jobs report in the US today

The main currency pairs continue to trade in quite tight ranges notwithstanding some souring of market sentiment (as oil prices have moved higher) and ahead of today’s employment report in the US. The euro and sterling are both a touch softer against the dollar relative to yesterday morning’s levels, trading at around $1.1525 and $1.3450 respectively, while EURGBP is marginally lower at £0.8565. The US economy is expected to have added around 80k jobs in July according to the consensus forecast for today’s report, a bit more than in June (+57k), while the unemployment rate is expected to be unchanged from June at 4.2%.

Oil prices backed up as progress on reopening the Strait of Hormuz remains unclear – it had been thought that a deal might have been agreed before now – with Brent crude up around 7% from its intra-week lows to over $83 per barrel. This contributed to a jump in bond yields in the main markets, led by the US which saw 2- and 10-year yields increase by 5-6bps on the day. US equity markets also ended in the red, albeit modestly so, while European stocks had earlier finished with small gains.

The Financial Times reported that Fed Chair Warsh “would be prepared to raise interest rates at September’s meeting if the coming weeks’ inflation readings are high”, which added to the rise in US yields. Separately, Warsh’s Fed colleague Musalem said “it is crucial that monetary policy put a meaningful restraint on underlying inflation,” adding that “a central bank’s most valuable contribution to long-run growth is to supply the stable prices backdrop against which firms can plan the investment and innovation that fuel economic growth.”

For the day ahead, as noted, the main economic data is the employment report for July in the US. Other US releases scheduled include consumer credit (July) and the New York Fed’s latest survey of consumers short- and medium-term inflation expectations.