- Figures showed an increase in US jobless claims to 224,000 last week.
- US service sector business activity fell sharply.
- Economists predict an addition of around 200,000 US jobs in November.
Interest futures edged higher as the dollar and Treasury yields eased after downbeat US employment figures. However, the price traded in a thin range as market participants cautiously awaited the US nonfarm employment report.
US jobless claims (Source: Labor Department)
The dollar eased slightly after Thursday’s data revealed an unexpected increase in US unemployment claims. Figures showed an increase in claims to 224,000 last week, above estimates of 215,000. The surge signaled weakness in the labor market that could put more pressure on the Fed to lower borrowing costs. As a result, Treasury yields fell, allowing interest futures to climb.
The bullish trend for interest futures has held this week. A separate report on Wednesday revealed that service sector business activity fell sharply, with the PMI dropping from 56.0 to 55.7. Although it remained in expansion, the decline showed weaker demand in the services sector and the broader economy.
Market participants also paid attention to remarks from several Fed policymakers, which pointed to a likely rate cut in December. However, there was some caution about the future. Powell noted that the central bank was surprised by the economy’s resilience. When the Fed started cutting interest rates in September, there were clear signs that demand was slowing down. However, things changed after that, and policymakers became more cautious. As a result, Powell has said severally that there is no hurry to lower borrowing costs.
Nevertheless, his remarks failed to lower expectations for a December rate cut. Market participants are pricing a 70% chance of a rate cut. However, this might change after today’s nonfarm payrolls report.
Economists predict an addition of around 200,000 jobs in November. Such an outcome would be a big rebound after last month’s 12,000 jobs. A miss would solidify rate-cut bets, while a surprise jump would increase the likelihood of a pause. Meanwhile, the unemployment rate is expected to grow from 4.1% to 4.2%. This would support the case for a rate cut in December.
Elsewhere, traders also paid attention to political tensions in South Korea and France. Lawmakers in South Korea are looking to impeach the president, while the government in France recently collapsed after the Prime Minister resigned. The turmoil pushed most to drop risky assets like equities and buy bonds.
