In a shortened week due to holidays at the start of the week in the UK and the US, market activity has been lighter than usual. Ahead of NFP, ADP reports private sector jobs data Thursday that is expected at +650K vs +742K in April. According to economists at MUFG Bank, an increase of around 1 million on Nonfarm Payrolls should lift yields and USD.

May jobs data Friday are coming into focus

“There is likely less appetite for putting on fresh risk ahead of the key event of the week – Nonfarm payrolls data from the US on Friday. That will start to come into greater focus today with the release of the ADP employment data – the market consensus is for a gain of 650K in May after a 742K gain in April. If the consensus print was confirmed tomorrow and on Friday it would imply the marked weaker than expected April NFP print would not be captured by ADP and a divergence would exist.”

“A consensus print in ADP may see the NFP consensus of 650K creep a little higher ahead of the release on Friday.”

“A strong jobs market rebound is an important component of the argument of transitory inflation becoming permanent through higher wages and hence the hourly earnings print on Friday will be crucial also. Average hourly earnings are expected to gain 0.2% MoM after a big 0.7% gain last month which would ease fears over a wage inflation surge.” 

“We suspect something closer to a 1 M increase in NFP would be needed to notably lift yields and the dollar.”

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