We’ve written extensively about the key jobs data release later today which should influence both the next Fed meeting in less than two weeks and so where markets may go for the foreseeable future. Last month’s disappointing print set the trading tone for May and this report should be similar. Grab the popcorn (courtesy of AMC?) and get ready for a rollercoaster ride at 12.30pm GMT.

The “whisper number” for the headline number has now risen to 790k while the range of estimates among analysts is from 400k to one million job gains.

Labour market detail

What the job numbers will give us are fresh details about the severity of the supply-demand mismatch for workers and if the causes for last month’s miss remain valid. These include worker worries about catching Covid, continued home schooling and older workers who’ve decided not to return to the workplace.

Broader labour shortages stemming from the overly generous expanded benefits programme will also be a focus, with over 20 Republican states announcing an early scaling back of support of the unemployed ahead of the September expiry. This phasing out, vaccination progress and stimulus checks being spent might see labour shortages disappear quickly.

Buck moving off the lows

The greenback moved sharply higher yesterday and is also bid today, perhaps due to short covering ahead of the event, but also due to the weekly initial jobless claims falling below 400k for the first time since the pandemic began. The ADP number came in way above expectations too, but this is not a great predictor for the headline NFP.

This all means we may need a print above one million to lift the dollar some more, while anything in the range of the whisper number may see low volatility after the initial knee-jerk reactions by all the trading machines.

USD/JPY nearing highs

One currency major very closely tied with today’s data release will be USD/JPY as US bond yields are strongly (negatively) correlated with the yen. This means USD/JPY rises when Treasury yields rise as the yen weakens. This is exactly what we saw yesterday with the dollar gaining as US 10-year yields pushed above 1.60%.

USD/JPY is now currently trading above 110 and around last week’s high at 110.19. Bullish momentum has picked up and the next target is the year-to-date high at 110.96 while support sits at this week’s low at 109.33 and the 50-day SMA just below here.

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