Weekly Focus: Weak US Job Report Should Keep Fed Off the Trigger
Market movers ahead
- The focus continues to be on whether the Fed is about to hike this summer. Today's job report makes it in our view unlikely that the Fed will hike over the coming months. We will still be following Fed Chair Yellen's speech next week closely.
- In terms of US data released, the calendar is relatively light, but it is worth keeping an eye on the preliminary University of Michigan consumer survey.
- In the euro area the calendar is also fairly thin, with the focus on Sentix investor confidence and the GDP components.
- In the UK everything continues to be driven by the upcoming EU referendum.
- In China, trade data is to be released. Exports have shown signs of improvement in the PMI surveys and we prefer to look at this as a gauge of the situation for exporters.
- In Scandi the focus is on Norges Bank's Regional Network Report and Danish inflation.
Global macro and market themes
- Markets are currently too complacent about Brexit risks, in our view, albeit our base case is that the UK votes to stay in the EU.
- A July Fed rate hike will be priced out further. We expect the Fed to hike in September.
- EUR/USD should head higher short term - we still look for USD strength into the Fed rate hike.
- We have turned negative on equities on a likely Fed repricing and slashing of earnings estimates.