EUR/USD flows: Lots to ponder into payrolls
Payrolls up next; recent data trend positive though May payrolls performance less so
Comes at a time when policy uncertainty is very high over all the big questions
Absent other big drivers, largest expiries today at 1.1650 may well be attracting, with 1.1615 below.
Payrolls data very much in focus. One of the biggest background questions right now is whether the market is underplaying the risks of a full pivot from the Fed. Related to that, whether the neutral rate is higher than assumed in the current fiscal and capex environment; and/or whether the output gap and inflation mix would normally be suggesting higher rates than prevailing (on versions of the Taylor rule or otherwise).
In short, whether one way or another policy is currently more accommodative than assumed. That question mark is amplified by uncertainty over how Warsh taking the helm will play out. Hard to separate any of this from the uncertainty over Iran and any broader shifts in Fed policy approach and strategy going forward.
More immediately though, that sits within the related but altogether different short-term market question hanging over the current tech performance at the end of this week. Namely, whether recent action has got slightly too stretched and could see more of a mini shakeout and pullback - and if so, whether that will tend to set the more immediate tone, or Iran will continue to dominate.
General data surprise trend for US has been strongly positive. Seasonal adjustments are negative for payrolls in May however so that may be one factor leaning against it today alongside the more nuanced multi-faceted labour market picture.