Payrolls day in the US

The euro and sterling are trading in relatively narrow ranges against the dollar. They are both a touch firmer than this time yesterday morning at around $1.1325 and $1.3310 respectively, though down a little from their best levels yesterday (close to $1.1350 and $1.3350). EURGBP is also largely unchanged, as it continues to trade in and around the £0.85 level. Looking ahead to today, a flash estimate of Euro area inflation in April is due later this morning, while the key US jobs (payrolls) report, also for April, is released in the afternoon.

US bond yields jumped yesterday, by around 6-9bps, led by the short-end of the curve, with slightly better than expected manufacturing data adding to the move higher. US stocks had a positive session, with the S&P 500 up around 0.6% and the Nasdaq adding 1.5%, as continuing talk of US trade deals and the possibility of talks with China providing a favourable backdrop for equity markets. Asian stocks have advanced overnight, while European indices have opened in positive territory (having been closed yesterday for a public holiday).

The ISM index of manufacturing activity in the US dipped for a third month in a row in April, but by less than forecast, to 48.7 from 49.0 in March. The sub-50 reading is still consistent with a further decline  in activity in this sector of the economy,  with production, new orders and employment all contracting again last month.

Today’s payrolls report in the US is expected to show the economy added 138k jobs in April according to the consensus forecast, down from +228k in March but broadly in line with the average monthly gain in Q1, while the unemployment rate is seen holding steady at 4.2%. In the Euro area, headline CPI inflation is expected to have dipped to 2.1% last month from 2.2% in March, but the core rate is seen ticking up to 2.5% from 2.4%.