Commerzbank’s Erik Liem flags the delayed US labour market report as the key driver for US rates and Dollar pricing, especially after the strong reaction to JOLTS. The bank’s economists expect stronger payrolls but a subdued trend, and see markets now pricing roughly three Federal Reserve cuts this year, with a larger downside surprise needed to push the US front-end sustainably lower.

Payrolls eyed as front-end driver

"Today's highlight will be the delayed US labour market report, especially after the strong UST reaction to last week's Jolts data. After the rather disappointing print in December, our economists forecast a higher increase in payrolls, while the trend remains subdued."

"While last week has shown how sensitive markets react to labour market data, a larger downside surprise seems necessary to sustainably move the US front-end. Fed expectations now price chances for three cuts this year (see chart), while yields across the curve are also back near the lows from early January."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)