• US to uphold tariff caps in deals with EU, Japan, and others
• Iran allows nuclear inspection, stonewall over uranium
• Dow hits record and S&P 500 gains as oil slides
• Broadcom drags on tech, European stocks gain

Forex

USD sold off mildly with FX volatility still fairly moribund. Data this week has been supportive for a Fed rate hike by year end, and certainly not a rate cut which is meant to be favoured by new Fed Chair Warsh. Eyes remain on the Persian Gulf though the continued ‘will they, won’t they’ is leading to more headline fatigue. The House resolution to end the war is meaningful, but it doesn’t block new military operations and simply highlights domestic pressure for a peace deal, Data is front and centre today with the monthly jobs report and comes after broadly resilient and solid recent jobs figures.

EUR outperformed in another relatively quiet day. ECB commentary has remained hawkish, with rate setters maintaining expectations for a 25bp hike at next Thursday’s meeting. That’s fully priced, and money markets are looking for another quarter-point move by September. This is likely providing support to the single currency with sentiment around US-Iran talks lingering.

GBP bounced off the 200-day SMA at 1.3419 but price action was relatively muted. Upside was also capped by the 50-day SMA at 1.3448. There’s not been much top tier data this week and currently now 18bps of tightening by December. Fundamental support is balanced by ongoing political risk into the June 18 by-election for Labour candidate Burnham, and prospective PM-in-waiting. There have also been murmurs around the possibility of a general election, with market’s eyes on any fiscal comments.

JPY underperformed its peers even with modestly hawkish talks from the BoJ. Reports say it would raise rates at the June meeting, with more tightening possible in 2026. Markets assign 20bps of tightening in June (ie. 80% probability), with an additional 20bps implied by year-end. The initial move in the major retraced as yen fundamentals remain bearish and two hikes close to being fully priced this year. The 160 level is big but there is limited additional resistance ahead of 162.

Stocks

US stocks: The S&P 500 added 0.41% to close at 7,5585, the Nasdaq closed down 0.54% at 30,408 and the Dow Jones settled higher by 1.73% at 51,562. Broadcom plunged more than 12% after guidance disappointed the expected $100 billion. This pulled down other semiconductor stocks after their stellar recent rally.  

Asian Stocks: Futures are mixed. APAC stocks went south after the soggy handover from Wall Street and tech performance. The ASX 200 was subdued on softness in mining and materials. The Nikkei 225 briefly tested the 67,000 level amid more FX intervention comments and rate normalisation talk from Governor Ueda.  The Shanghai Composite and Hang Seng followed the regional mood amid tech-related weakness.

Gold

Gold moved higher as the choppy price action over the last week or so continued. Range contraction for an extended period points to range expansion and breakout at some point. Obviously, the catalyst could be NFP. Strong data will likely cause bullion to sell off on inflationary concerns and see a retest of the 200-day SMA, key long-term support, now at $4,397.

Day Ahead – US Non-Farm Payrolls, Canada Jobs

May US non-farm payrolls are expected to show headline jobs growth slowing to 89,000 from the prior 115k, steady unemployment at 4.3% and wage growth one-tenth higher at 0.3%.  That all points to ​a still-resilient labour market. An inline headline print would mean a three-month moving average of around +135k, and a four-month moving average (which is reckoned to be a better gauge of the underlying trend) at roughly 65k. 

Alternative indicators are sending mixed signals. There’s momentum from April’s solid print, weekly ADP figures are solid and the subdued pace of initial claims since April’s reference week all point to a solid labour market. Tuesday’s JOLTS vacancy figures also pointed to a robust and tight picture. That said other data point to a more modest recovery given the limited run of hard data available.

The Canada headline jobs reading is forecast to see 10k roles added in May, more than the prior 17.7k contraction The jobless rate is seen steady at 6.9%. The BoC is data dependent at present, with uncertainty still high on Middle East and tariff tensions.

BoC Deputy Governor Vincent recently said labour market shifts complicate policy with the labour market being marked by low turnover, rising long-term unemployment and persistently high youth unemployment. Despite the recent inflation and jobs reports coming in beneath expectations, money markets continue to price in around one full 25bps hike by year-end.