Big NFP miss confirms summer easing path for Fed

The US employment report was terrible, making the rate cut decision a lot easier for Fed officials.  The nonfarm payroll report came in at 75,000 jobs, missing the median estimate by 100,000 and when you factor in the two-month revisions of 75,000 jobs, you get a net zero in May.  If the broader data on the economy continues to deteriorate going forward, we could see odds rise for two rate cuts before the summers over.   The trade war has damaged sentiment and will likely continue drive the recent deceleration in the economy.

The odds for a rate cut at the June 19th meeting almost doubled to 33.2%, while the July 31st meeting sees a 74.6% chance for a cut.  Labor data is lagging, so we might not need to wait for another month of employment data to further cement those odds.  If we don’t see meaningful trade progress by the June 19th FOMC meeting, the Fed has ammunition to pull the trigger on a 25 basis rate point cut.

The dollar got crushed across the board, with declines of 0.4% to the euro, yen, and loonie.

The Dow and S&P futures gave up their earlier gains and are looking at a slightly positive open.

Gold’s bullish momentum is firmly in place and seems like only a matter of time before breaking out higher.

Oil was unfazed by the NFP release and still trading higher on overall risk-on tone and positive comments from the Saudi and Russian oil ministers.

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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya