Though there are several things on the schedule for Friday, July 2, almost everything will pale in importance compared to the June nonfarm payrolls that will be published today.
The NFP reports in April and May shocked the markets by being way below the forecast, and since then the forecasts themselves have gone down. For instance, in April the forecast was 900K with the NFP coming in at around 250K. Now in June the forecast is 700,000, i.e. the bar is set considerably lower than it was two months ago.
Recently the Federal Reserve itself surprised the markets by announcing that its directors are ready to potentially support an interest rate hike in 2023, a year earlier than planned. Their decision seems easy if one looks at inflation, which has overshot the targets for some time now. But the picture looks different for the US labor market, which has been much slower to recover from the pandemic and the millions of jobs it destroyed.
Another disappointing jobs report could fuel further apprehension and solidify the opinion that the United States is not as ready for an early switch to hawkishness as some might hope. After all, yesterday’s continuing jobless claims were higher than expected, which does not bode well.
On the contrary, if NFPs actually meet the forecast or are better than it, the US dollar is going to take off on hopes of an even speedier hawkish action from the Fed in the foreseeable future.
Other fundamental reports worth mentioning today are the unemployment rate for June in the United States and average wage reports, which will complement the NFP data. There is also the May balance of trade in Canada.
Meanwhile, OPEC+ is continuing its meeting today after failing to reach a consensus on production output levels yesterday. Saudi Arabia remains very cautious while the United Arab Emirates surprised everyone by demanding higher quotas and vetoing the deal the remaining countries had agreed upon.
In other news, 130 countries within the Organization for Economic Cooperation and Development backed the 15% universal tax rate proposed by the United States. The tax applies to companies earning more than $100 billion of profits and will force companies to pay the taxes where the profit comes from, not where they are headquartered. This proposal was created because tech giants such as Amazon and Google have previously benefited from using low-tax countries as HQ in order to save on corporate taxes.
