RBA And RBNZ To Weigh 50 Basis Points Hikes; Nonfarm Payrolls In Focus
XM Group | Sep 30, 2022 08:15AM ET
A strong NFP might not be desirable
After the recent turmoil over worries about the UK economy and recession risks in general as central banks are expected to keep hiking rates for the foreseeable future, the upcoming nonfarm payrolls report might prove to be a welcome distraction for traders.
Before that, though, the ISM manufacturing and non-manufacturing PMIs, due on Monday and Wednesday respectively, will be watched in the United States. Despite three consecutive quarter-point rate increases by the Fed, the American economy is showing no signs of material damage. Even though there’s been some discrepancy between the various business surveys, the ISM PMIs have held up relatively well.
If that remains the case in September as well, it would cement market bets for another 75-bps rise in November. But for the Fed, a more important criterion is the labour market. As long as both inflation and the labour market stay hot, the Fed will see no reason to slow down the pace of tightening. Friday’s jobs report will therefore be one of the most crucial deciding factors before the November decision.
Oil has been in a steady downward trajectory since June and a greater-than-expected cut in production could push prices above this bearish channel. It would also weigh on broader risk sentiment as one of the few positives for investors lately has been the fact that energy prices have been coming down.
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