Key US payrolls data due today
Relatively subdued day in markets yesterday, with the focus now very much on August US payrolls data due later today. The data is being very closely watched as this is the last major US labour market release before the September FOMC meeting. The dollar is coming under some pressure and has lost further ground with the euro moving up above $1.11 while sterling gained to $1.3180. EURGBP was broadly unchanged at 84.3p. Equities sold off in both the US and Europe, while Government bond yields fell with 10-year US, UK and German bonds losing anther few basis points.
US August payrolls are due today with the consensus forecast for 165k gains last month and the unemployment rate forecast to tick down to 4.2%. Payrolls missed expectations in July when 114k jobs were created and the unemployment rate edged up to 4.3%. The Fed is preparing to start to cut rates at their meeting this month and they are focused on the labour market with Fed chair Powell saying he doesn’t want to ‘seek or welcome further cooling’. Markets are pricing in 100bps of Fed easing by year end and if there is a miss in payrolls today that would increase market expectations that the Fed will start with a 50bps cut this month to the Fed funds rate rather than 25bps.
Irish GDP contracted by 1.0% quarter-on-quarter in Q2 2024, leaving the annual change at -4.0%. However, the fall was caused by a big drop in investment due to a fall off in multinational intangibles investment. Intangibles investments by MNC’s have little impact on the real economy and other indicators such as personal consumption up 1.9% year-on-year in the first half, employment up 2.3% and domestic demand up 1.9% suggest the underlying domestic economy is still growing despite the drop in headline GDP.
Government bond yields fell a little further yesterday, as markets look to central bank’s next moves in easing monetary policy and yields are ticking down again on the open this morning. US 10-year yields lost 3bps yesterday and are trading at 3.7% currently with similar term UK yields ticking down 2bps, now trading below 3.9%, and German 10-year yields down 2bps yesterday also and under 2.2% this morning. Though it was relatively quiet, equities continued to sell off a little with S&P 500 down 0.3% for the day, the FTSE down 0.3% and the Eurostoxx was down 0.7%.
On the agenda today, US payrolls and unemployment date is the big event, due at lunchtime today. Speakers out later include Williams and Waller from the Fed.