US TSYS: Headline Risk Rattles Markets Ahead of Friday's Headline Jobs Report
Jun-05 20:07
- After gapping higher early Thursday, Treasuries look to finish at/near late session lows as markets try to absorb a raft of trade-related headline risk, higher weekly claims & labor costs, several Fed speakers and the ECB's 25bp rate cut decision earlier.
- Treasury futures extend gains briefly then pared move after higher than expected weekly claims while continuing claims come out a little lower than expected, prior down-revised; unit labor costs higher than expected. Rates continued to pare gains as details of Pres Trump/Xi phone call emerge - less optimistic regarding trade than when the headline first aired.
- Initial jobless claims unexpectedly rose in the week of May 31, rising to 247k (235k expected) from 239k (rev from 240k) prior. Continuing claims meanwhile went in the opposite direction, ticking lower in the May 24 week to 1,904k. Unit labor costs (ULCs) were revised substantially higher in the Bureau of Labor Statistic's Q1 final release, rising 6.6% Q/Q SAAR (rev from 5.7% prelim, and up from 3.8% prior).
- Meanwhile, ahead of Friday's headline jobs report for May, the Challenger Gray report for May saw 93.8k job cut announcements, after 105k in Apr, 275k in Mar (of which 217k was govt) and 172k in Feb.
- Note, late headline risk saw stocks tumble after the bell as Trump/Musk spat really heats up after the bell, Pres Trump musing about ending Musk's government contracts while Musk responds with claim that Trump is in the Epstein files.
- The U.S. Treasury on Thursday added Ireland and Switzerland to its currency manipulator watch list, and officials warned continued strengthening of global currencies relative to the dollar could see more foreign exchange market interventions and rising current account surpluses that would land more countries on the list.
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USDCAD TECHS: Southbound
May-06 20:00
- RES 4: 1.4415 High Apr 1
- RES 3: 1.4296 High Apr 7
- RES 2: 1.4066 50-day EMA
- RES 1: 1.3914 20-day EMA
- PRICE: 1.3781 @ 17:02 BST May 6
- SUP 1: 1.3760 Low May 2 and the bear trigger
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
Bearish conditions in USDCAD remain intact. A fresh cycle low last Friday reinforces the bearish theme signalling scope for a continuation, near-term. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Note that Moving average studies are in a bear mode position, highlighting a dominant downtrend. On the upside, first resistance to watch is 1.3914, the 20-day EMA.
US OUTLOOK/OPINION: Macro Since Last FOMC: Labor - Pessimistic Consumers [2/2]
May-06 19:44
- Some consumer expectations point to a particularly bleak outlook for the labor market over the next year. A question in the U.Mich survey for instance has shown two months now at its weakest since 2008/09.
- However, for now, initial jobless claims remain in a well-defined range and are still close to levels associated with a tight labor market. The nearest sign of potentially some softening in re-hiring activity was the latest increase in continuing claims to a fresh high since late 2021 but it’s just one week of data and should be interpreted carefully with potential Easter distortions.
- The next few months of data are likely to be more revealing.
US OUTLOOK/OPINION: Macro Since Last FOMC: Labor - Robust Payrolls Report [12]
May-06 19:42
- There have been two payrolls reports since the last FOMC meeting and both have been stronger than expected whilst also ruling out a material climb in the unemployment rate.
- Downward revisions have taken some of the gloss off payrolls growth in these March and April releases yet we’re left with a three-month average of 155k (177k in Apr, 185k in Mar and 102k in Feb). That’s comfortably firmer than long-run breakeven estimates closer to 100k, which should start to become more binding with tighter immigration policy under the second Trump administration.
- The breakdown of monthly payrolls growth in April shows one of general resilience, including strength in transportation & warehousing that shows no sign of adverse impacts from tariffs. Of course, this is still early for job losses to be showing up, especially with the pay period including April 12th being still close to the Apr 2 "Liberation Day" tariff announcements (before the partial backtracking on Apr 9) with companies still assessing how to respond under heightened uncertainty.
- However, accompanied with a further large increase in average weekly hours worked for transportation & warehousing, as well as retail and wholesale trade, it appears that prior tariff front-running and the surge in imports/build in inventories is helping boost jobs growth despite broader uncertainty.
- Similarly, the unemployment rate has only inched higher recently, from 4.14% in Feb to 4.15% in Mar and 4.19% in April, below a high of 4.23% back in November and versus a median FOMC forecast of 4.4% for 4Q25.
