What are today’s key events?
The main focus will be on the Canadian Employment Report and the US Non-Farm Payrolls (NFP).
European Session:
During the European session, we’ll only see some minor data releases such as industrial production from Germany and France, and retail sales from the Eurozone. These are unlikely to have any meaningful impact on current market pricing.
US Session:
Things get more interesting in the US session with Canadian jobs data and the all-important NFP report.
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Canada:
The employment change is expected to come in at -12.5K (previous: +7.4K), while the unemployment rate is seen ticking higher to 7.0% (previous: 6.9%).
The Bank of Canada (BoC) held rates steady earlier this week, signaling a wait-and-see approach as they assess ongoing trade uncertainty and steadily rising inflation since late 2024. The market is currently pricing in around 31bps of easing by year-end, with the next move expected in Q4 2025. -
United States:
The US NFP report is expected to show a gain of 130K jobs in May (vs. 177K in April). The unemployment rate is forecast to remain steady at 4.2%.
Average Hourly Earnings YoY are expected at 4.2%, unchanged from the prior reading. On a monthly basis, wages are seen rising by 0.3% (vs. 0.2% previously).
Other labor market indicators have already pointed to some softening in hiring, which isn’t too surprising given the ongoing tariff uncertainty. That said, any weakness in today’s data is unlikely to be severe enough to prompt immediate Fed action.
Markets currently price in 54bps of rate cuts by year-end, with the first cut expected in September.
Bottom Line:
If today's data comes in stronger than expected, the Fed will have little incentive to move forward with rate cuts. In that case, markets may start to unwind some of the currently priced-in easing.
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