So the onus is on the data to show a cool-down, or risk another rate hike. Fed fund futures now imply a 55% chance of a hike by year end, compared with 32% a week ago, while the expected easing for next year is down to 92 basis points from around 130 basis points at the start of this month.
Recent PMI data did point to a slowdown, with services particularly disappointing. Analysts note the PMIs have a better track record on predicting the European economies than for the U.S., where the ISM survey reigns supreme. That report is out at the end of this week – along, of course, with payrolls.
Median forecasts are for a further modest slowing in jobs growth to 170,000, though JPMorgan is warning of the risk of a downside surprise because of the writers and actors strikes in Hollywood. They are tipping a jobs gain of 125,000, which would be the lowest since early 2021 when the pandemic was still messing with the labour market.
A result like that would see markets again scale back the risk of another Fed hike and offer a much-needed lift to Treasuries, where two-year yields are threatening the year’s top – and a major chart bulwark – at 5.12%.
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