The NFP report for the month of April showed the US economy added far fewer jobs than expected. How will the Fed members interpret the data?
The Non-Farm Payrolls (NFP) report dominated the headlines last Friday. The US economy added far fewer jobs than the economists expected (266k vs. 990k), but for a curious reason – jobs do exist, but they remain to be filled.
Many Americans enjoyed a higher income during the COVID-19 pandemic than they had done in their previous jobs. As such, going back to work requires more effort for the US employers, both in terms of working conditions as well as offered pay.
Wage inflation, therefore, is a possible consequence during the summer. Traders will have an idea about by how much prices rose in April as the US CPI is due on Wednesday. The market expects inflation to have risen by 0.2% in April and the core data by 0.3%.
All About Fed Speakers
The US inflation and Retail Sales are the main economic reports to be released this week, but the key for the US dollar volatility comes from the Fed.
Each day this week there is at least one Fed member holding a speech. Today, the Fed’s Evans discusses the economic outlook at 2pm local time. Evans is a dove and a voter in the Federal Open Market Committee (FOMC), so his rhetoric will likely lean on the bearish side of the dollar.
On Tuesday, no less than three Fed members will guide markets. Firstly, John Williams, a moderate dove, will hold a speech at the SOFR Symposium. He is also a voter in the FOMC and its Vice-Chair.
Secondly, Lael Brainard will deliver her views on the economic recovery and the road ahead. Her words will likely weigh more on the dollar, as she is a governor of the US Federal Reserve, and her opinion can easily move markets. Thirdly, Mary Daly, a non-voter and a dove, will close the day by giving a speech at the Community Bankers Event.
The US economic outlook is once again in discussion on Wednesday and Thursday. Fed members Clarida, Waller and Bullard will talk about the US economic outlook, all three being doves or moderate doves.
Finally, the Fed members’ intervention ends on Friday with Robert Kaplan’s participation in a moderated discussion about the US economic future. He is the only mid-hawk speaker, but his views should not move the markets for a simple reason – he is a non-voter in the FOMC.
When Fed members speak, market participants listen. This week is particularly important in light of the big NFP miss from last Friday. What will the Fed members’ explanation be?