Non-Farm Payrolls Are Pivotal

Few doubt that hiring will be high for the remainder of the year but the pace will mandate how quickly the Fed moves. ADP employment offered an early look at the state of the jobs market as the Fed begins its taper debate. The US dollar was the top performer on Wednesday while the yen lagged. GBP weakness deepened in Europe after BoE's Bailey said policy makers must not overreact to "temporary" jump in inflation. Ahead of the OPEC meeting, US crude oil hit $75 for the 1st time since Oct 2018. Jobless claims are next, exp 388K from 411K.

The early consensus on non-farm payrolls is 700K job in June. That should firm up after ADP employment rose 692K compared to 600K expected, though that report has a poor recent track record.

Whatever the employment number is on Friday, there is plenty of evidence that jobs are available. The issue is that workers aren't applying for low paid jobs the way they used to. Part of the reason is that in much of the country, jobless benefits will extend through August.

That's allowing workers to be picky in what work they will accept. In addition, families have an incentive to wait until after the summer when school restarts.

That thinking puts the Fed on a slow path to tapering but it could change if there is a surprisingly strong jobs report. In particular, the wage indications could convince some FOMC members that inflation risks call for more action.

For the dollar, the trade is straightforward around USD/JPY. It's testing the April 2021 highs and not far off the 2020 peak at 112.23. That's followed by a series of annual highs that stretch up to 115.00. Dominos will begin to fall whenever the jobs growth materializes.