The market’s reaction to the NFP data coming out tomorrow might be a bit muted after the changes following the Fed’s most recent meeting. For the markets, labor figures are crucial for two main purposes: insight into how the economy’s doing and implications on Fed policy. There will be two more NFP releases before the Fed meets again, so the impact on monetary policy from tomorrow’s data could be reduced.
The market, on the other hand is on tenterhooks due to the recent troubles seen at two more regional banking institutions. The Fed has heavily implied that there will be a rate pause at the next meeting, and now markets have shifted to betting on when the “pivot” will happen. The pivot is usually understood to be the time when the Fed starts cutting rates. It could all come down to what the labor statistics show, especially if those numbers are different from expectations.
Contextualization
The Fed is at odds with the markets about the future of interest rates. This has major implications on the dollar. The market began pricing in an interest rate increase as early as July after the FOMC’s meeting on Wednesday. This would be followed by a second cut in September. The Fed has insisted that it will maintain high rates through…
