Forex Top Team

June’s decision: Hold or Rate Hike? Today’s US Employment Statistics will be the litmus test.


Today, the focus will be on the US Employment Statistics. It is a crucial indicator that will help determine whether the June FOMC will hold interest rates or opt for a rate hike. Market expectations suggest a slight slowdown from the previous increase of 253,000 non-farm payrolls, with an estimated increase of around 200,000. The unemployment rate is expected to show a slight increase from 3.4% to 3.5%. As for wages, which influence consumption and inflation trends, the average hourly earnings are predicted to grow at a slower pace of +0.3% (compared to the previous +0.5%), while the year-on-year change is expected to maintain a level similar to the previous figure of +4.4%.

In the current market environment, approximately 80% of market participants anticipate a hold in interest rates for the June FOMC meeting, while around 20% have factored in a 25 basis points rate hike. Expectations for a hold decision have increased significantly. Recently, two Fed officials hinted at a temporary pause in rate hikes, and yesterday’s ISM Manufacturing Purchasing Managers’ Index fell below expectations due to a decline in new orders. Additionally, the unit labor costs were significantly revised downward.

Considering the prevailing market expectations for a rate hike until last week, there is a high possibility that today’s US Employment Statistics will once again change market sentiment. A strong result could increase rate hike expectations, while a weak result would solidify expectations of a hold decision.

In terms of other economic indicators, the scheduled releases include France’s industrial production for April in the early morning London session and Brazil’s industrial production for April in the early morning New York session. As for speeches, there is a scheduled speech by Bank of Slovenia Governor Bostjan Vasle in the early London session. Given that US financial officials are entering a blackout period, they will refrain from making statements about economic outlook and monetary policy. The focus will be almost entirely on the US Employment Statistics, which is scheduled to be released at 9:30 PM Japan time.

Considering that the upward potential of the dollar buying trend has become limited, even if the US Employment Statistics turn out to be positive, it is expected that the upside will not see significant growth. On the contrary, if the results fall below expectations, a considerable amount of USD selling can be anticipated.

In such a scenario, we are considering a strategy of buying AUD/USD or GOLD once again.

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