Rates on the Move: Dollar Rates Set to Rise, Sterling Rates Poised to Fall - US Labour Market Data Holds the Key!
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Rates Spark: Sterling rates most likely to fall, dollar rates more likely to rise
US labour market data could trigger another leg higher in dollar rates but we doubt their euro peers will follow, barring a much stronger inflation print today. Hawkish BoE pricing is vulnerable to a pushback.
US labour market indicators take centre stage
The start of the week is proving a constructive one for bonds. It seems the feel-good factor felt by markets, after the White House and House leader McCarthy reached a deal to raise the debt ceiling over the weekend, was short-lived. The deal is due to be voted on today by the lower chamber and later this week by the Senate.
We think expectations are for the bill to pass, which also means the market-moving potential of a successful vote is limited. The same cannot be said of any delay on procedural grounds, although more would be needed to shake the market’s optimism.
Instead, the focus should now focus on more fundamental matters for interest rates valuations, namely this week’s two labour market releases. Today sees the publication of the ‘JOLTS’ job openings report, followed on Friday by the non-farm payroll report (which also includes wages). Rate cut expectations last month received a shot in the arm when job openings unexpectedly dropped but payroll data continues to go from strength to strength and we expect investors will be wary of chasing bond yields lower into the report as a result.
We expect investors will be wary of chasing bond yields lower into Friday's job report
