🔽 US500 pulls back ahead of US jobs data

NFP report for May will be released today at 1:30 pm BST. It is highly unlikely that this report alone will change the outlook on Fed's policy in the coming months. Of course, a massive drop in employment could discourage Fed from hiking rates but the probability of a negative reading is seen as low. There have been some hints that jobs figures may be weaker than expected but attention is likely to be focused on wage growth data. Should wage growth dynamics reverse, Fed may reconsider 25 basis point rate hikes instead of 50 basis point rate hikes. What to expect from today's report?

• ADP report showed jobs gain of just 128k while market expected 300k

• Market expects NFP report to show 320k jobs gain in May, after a 428k jobs gain in April

• Goldman Sachs points that May tends to be a weak month according to seasonal patterns

• Goldman Sachs expects jobs gain of 225k, given a big drop in job advertisements

• JOLTS dropped by almost 0.5 million in April, to 11.4 million. Demand for work remains strong but a drop in the number of newly opened positions is significant

• BLS survey was conducted when jobless claims sat at around 220k per week, compared to 180k in April

• Market expects unemployment rate to return to pre-pandemic 3.5%

• Wage growth is expected to slow from 5.5 to 5.2% YoY in May. Wages growth is seen at 0.4% MoM in May, after 0.3% MoM increase in April

• Capital Economics suggests that a slight cooldown on labour market and pick-up in jobs supply may point to wage growth peak being reached

• However, wage growth near 5% will continue to exert upward pressure on price growth

EURUSD returned towards recent local highs, what may be related to weaker data readings, especially ADP reading yesterday. However, it will be wage growth that is most important for index or USD traders. If wage growth had peaked by now, it would be a bullish sign for equities. US500 continues to struggle with breaking above a 4,200 pts resistance zone.

Source: xStation5