US Nonfarm Payrolls report: Today's report took on added importance

In a highly volatile market environment, today's non-farm payroll report took on added importance.

The balance of risks could have been considered uneven before the publication, leaving the dollar exposed to a further sell-off should we see a large downward surprise. The worst-case scenario, implying a significant loosening in the labour market prior to the escalation of the trade war, has not materialised, allowing the markets to take a breath.

The headline employment number surprised substantially to the upside, but this was partly offset by the downward revision to the last two months’ data and an uptick in unemployment.

Normally, wage growth would have been a focal point, as it posted the second-lowest YoY increase since the pandemic. Given the sky-high uncertainty regarding tariffs, the impact will be muted. 

The market reduced its expectations of Fed interest rate cuts for this year somewhat, as no particular slowdown is visible in hard labour market data so far. This move could be considered quite marginal as compared to what we have seen after the “Liberation Day”, however.

Fed fund futures still point to around 110 bps of rate reductions until year-end. We do not think this labour market report, which precedes Trump's escalation of the trade war and the subsequent market meltdown, changes the outlook significantly.