Strong increase in non-farm payrolls.

US non-farm payrolls increased 339,000 for May compared with expectations of close to 200,000 while the April increases was revised higher to 294,000 from 253,000.

Manufacturing payrolls declined 2,000 on the month and there was a small decline in the information sector while government jobs increased over 55,000 for the month.

According to the household survey, the unemployment rate increased to 3.7% from 3.4% and above expectations of 3.5%. The survey reported an unchanged participation rate with a decline of over 300,000 in the number of employed. Average hourly earnings increased 0.3% on the month with the annual increase slowing slightly to 4.3% from 4.4% after a small downward revision for April.

The Fed should now be in a blackout period ahead of the June 14 th policy decision, but markets will remain on alert for any unofficial briefing through the Wall Street journal. The situation will be complicated by the fact that the latest Consumer prices inflation data will be released on June 13th which could have an important impact on the decision.

Following the US data, there was only a limited change in Fed Funds rate expectations with futures markets indicating a 26% chance of a June rate hike and over a 60% chance of a rate hike for July.

Higher US yields were important in underpinning the dollar and the US currency posted net gains against major currencies.

OPEC+ announced that the current production cap would be extended to the end of 2024 while Saudi Arabia announced that the July output would be cut to 9mn bpd from 10mn.

The latest US ISM non-manufacturing data will be released on Monday. Consensus forecasts are for an increase in the headline figure to 52.6 from 51.9. The prices data will be watched closely in the data.

The Reserve Bank of Australia (RBA) policy decision will be announced on Tuesday. Consensus forecasts are for the bank to keep interest rates on hold at 3.85%. Forward guidance will inevitably be important for Australian markets.

The dollar posted gains after the stronger than expected US payrolls data.

The US currency held gains despite mixed components. Higher US yields also underpinned the US currency. EUR/USD dipped to lows near 1.0700 and traded just below this level on Monday. Higher US yields and stronger equities undermined yen support. Markets remained wary over potential verbal intervention. USD/JPY posted gains the 140.00 area and tested resistance above this level on Monday to trade around 140.20.

The Swiss franc was mixed during the day. EUR/CHF edged lower to near 0.9730 with net USD/CHF gains to 0.9090.

Sterling lost ground despite firm equities with a cutting of long positions. GBP/USD dipped to 1.2450 as the dollar strengthened.

The Australian dollar failed to hold intra-day highs and AUD/USD settled around 0.6600 as solid Chinese data provided some support. USD/CAD edged lower to near 1.3430 as oil prices posted further gains.

Economic Calendar