After the ECB, Markets Look to the US. What’s About to Happen?

Markets React to ECB Meeting and Look Ahead to US Data

The markets are buzzing with activity as they digest the outcomes of the recent ECB meeting, where a 25 basis points interest rate cut was announced.
All eyes are now on the US, especially regarding the upcoming data on unemployment and payrolls.

Investors and financial operators are now questioning when the most globally relevant central bank, the Fed, will start its monetary easing.
Following the ECB’s decision, the Bank of Canada also cut its benchmark rate, becoming the first G7 nation to do so.
This move aligns Canada with the Swedish Riksbank and the Swiss National Bank in starting their own monetary easing cycles, injecting new life into the global risk rally.
Speculations are rising that the Fed might also cut rates in September.

However, a shadow looms from China.
Despite the Chinese exports growing at a faster pace for the second consecutive month in May, the dragon’s indices are closing in the red.
This negative sentiment was sparked by the news that US Republicans expressed intentions to ban Chinese companies linked to Ford and Volkswagen from shipping goods to the US.

Focus on US Data

Investor attention is now solely focused on the upcoming US employment data, expected to show an additional 180,000 jobs in May with a steady unemployment rate.
The swap markets have been indicating a starting point for Fed rate cuts in November, most likely commencing in September.

Joseph Capurso, head of international economics at the Commonwealth Bank of Australia in Sydney, anticipates a positive overall message from the non-farm payroll report, despite a slight decline.
This could potentially reject the market price for the first FOMC rate cut in September, supporting a modest increase in the US dollar.

As highlighted by a Reuters analysis, traders are on high alert for Friday’s release of the US non-farm payrolls report.
Expectations are set at 185,000 new jobs added in the world’s largest economy last month.
Rob Carnell, ING’s Chief Economist for the Asia-Pacific region, mentioned that “if we were to get slightly weaker data tonight…
we could see the 10-year Treasury yields edge towards the 4% mark.”

JPMorgan Chase and Citigroup stand out as a few banks still forecasting a Fed easing next month.
Traders virtually ruled out a cut in July back in April and now expect stable rates until November according to swap rates.