After an upbeat close on Wall Street and a fresh record high on the S&P500, European bourses are also out of the blocks on the front foot. The strong rally from the first half of the year has transferred across into a solid start to Q3, as investors look ahead to the US non-farm payroll data due later today.
The FTSE is edging higher, shrugging off rising Covid cases as homebuilders lead the charge. Jefferies is maintaining its positive stance over UK homebuilders, keeping the likes of Taylor Wimpey and Barratt Developments buoyant.
The economic calendar in Europe has been quiet, with little for investors to sink their teeth into.
As such, investors are now focused squarely on the US labour department’s non-farm payroll report.
After two disappointing prints, the NFP is expected to show 700,000 new jobs were added in June. Job numbers are expected to have picked up as the economy continued to reopen, boosting demand while higher wages lured the unemployed back into the labour market.
Today’s data will shed some light on the health of the labour market recovery and a possible timeline for the Fed’s plans to tighten monetary policy.
The leading indicators heading into the reading are not that encouraging. The employment component of the ISM manufacturing PMI declined from 50.9 last month to 49.9. The ADP private payroll figure was also down from 886k last month to 692k. However, the four-week moving average unemployment claims were slightly more upbeat, dropping to 393k from 428k. Even so, two of the three lead indicators are softer, which doesn’t bode well for today’s release.
Today’s NFP report comes following two weaker-than-forecast prints. A third weak print could indicate a new trend of declining jobs growth, which could unnerve the Fed. Surging inflation and declining jobs growth is not a good place to be whichever way you look at it.
US futures are hovering around all-time highs ahead of the NFP data. A weaker-than-forecast reading could dampen bets of the Fed hiking rates, boosting stocks to fresh record levels.
FX – US dollar trades at three-month highs ahead of NFP
The US dollar hit a fresh three-month high versus its major peers on Friday as investors look ahead to the closely-watched non-farm payroll report. The greenback is trading higher for an eighth straight session, set to book gains of 0.8% across the week.
The USD has been on the rise since the Fed surprised the markets with a hawkish shift two weeks ago. As a result, the dollar has become more sensitive to US macroeconomic data.
All eyes will now turn to the US non-farm payroll. A stronger-than-forecast reading could send the greenback higher. It appears the US dollar could well have bottomed out. Central bank divergence is in favour of the greenback, which makes a return of the USD index to sub 90.00 look unlikely
