Key Events This Week: Us Jobs Report Offers Next Marker in Inflation Debate

At the time of writing, US futures are holding steady even as US and UK markets will be closed on Monday.

What is an index and why it matters? A chat with Nasdaq

Wall Street’s so-called “fear gauge”, the VIX index, ended the trading week below the psychological 16 level. Another week of calm could send it to a new year-to-date low, below the 15.38 level set on 14 April.

Much could depend on how markets react to scheduled events this week:

Monday, May 31

• US, UK markets closed
• Japan industrial production, retail sales, consumer confidence
• OECD economic outlook

Tuesday, June 1

• Manufacturing PMI: China, Eurozone, UK, US
• RBA policy decision
• BOE Governor Andrew Bailey speech
• Fed speak: Fed Governor Lael Brainard
• OPEC+ meeting

Wednesday, June 2

Fed speak:

• Philadelphia Fed President Patrick Harker
• Chicago Fed President Charles Evans
• Atlanta Fed President Raphael Bostic
• Dallas Fed President Robert Kaplan

Thursday, June 3

• Services/composite PMIs: China, Eurozone, UK, US
• US initial jobless claims
• Fed speak: Fed Vice Chair for Supervision Randal Quarles, Philadelphia Fed President Patrick Harker

Friday, June 4

• Panel discussion with central bank heads: Fed Chair Jerome Powell, ECB President Christine Lagarde, PBOC Governor Yi Gang
• Eurozone retail sales
• US nonfarm payrolls

US jobs report key for Dollar direction (DXY)

The US nonfarm payrolls print is scheduled for the first Friday of every month. The figures due on 4 June carries greater weight, following the shockingly-low figures posted on the first Friday of May.

Markets would interpret another lower-than-expected jobs tally to mean that the Fed might be more willing to maintain its support measures until the job market is on a more solid footing. Hence, another lackluster jobs report could see the dollar index (DXY) relinquish the 90 handle once more.

However, a non-farm payrolls report that exceeds market expectations would be taken as a sign that the tightening labour market could further boost inflationary pressures.

Recall that this past Friday, the April US core PCE inflation’s 3.1% surpassed the market-expected 2.9%. That was the highest year-on-year print since 1992, albeit with the low base effects in play.

A bumper NFP this Friday could spur another selloff in US Treasuries, sending its yields surging, which in turn would offer tailwinds for the dollar.

Commodity spotlight – Oil (Brent)

OPEC+ is slated to decide on Tuesday whether to further loosen the oil taps over the coming months. At a time when markets are already bracing for more oil shipments out of Iran pending their nuclear talks with the US, more incoming global supplies would dampen oil prices further.

Over on the demand-side, watch the global PMI readings and the latest OECD economic outlook for the latest signs of a demand recovery. China’s manufacturing PMI released this morning shows that the sector is still firmly in expansionary territory in May, having posted a reading above 50 every month since February 2020.

Should markets grow confident that global demand can absorb the incoming supplies, this might help Brent oil claim a stronger hold on the $70/bbl handle.

Written on 31/05/21 06:00 GMT by Han Tan, Market Analyst at FXTM

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