Photo: US Navy
This is how fast optimism is breaking out.Citi’s Steve Englander offers up his lessons from yesterday’s strong ADP:
- Market expectations moved a bit after ADP but probably by only about 25K
- On a surprise to payrolls on Friday (either positive or negative) CADJPY may be the biggest mover.
About 20% of the forecasters polled by Bloomberg changed their forecasts today and the median forecast for those with a July 7 timestamp is 125K vs. 100K for those with a July 6 or earlier timestamp. So the true consensus is probably somewhat above the median of 105K that includes both revised and unrevised forecasts.
Citi expects 100k, private sector jobs forecasted to rise 130K. The range for the July 7 forecasts is 85K to 175k and is well distributed in this range. It is probably the case that an above 150K outcome will be regarded as a positive surprise and below 115K as a negative. The rates moves of a couple of bps higher in – and 10-year yields is consistent with a modest upside shift in expectations but no wholesale change.
Post ADP the best long was CADJPY which jumped almost 1% after the release. If sovereign debt concerns are not affecting markets SEK- and NOKJPY are also likely to respond well. USDJPY and AUDJPY also showed gains. However, the more moderate moves suggest positioning may here be a greater constraint.
For more on the jobs report, see here.