 Good afternoon ladies and gentlemen. Welcome to this week's US employment report coverage for June with me Michael Houston. This this week's, well this week's, this month's payrolls report certainly comes against an interesting backdrop, I think, or a market backdrop given the strong payrolls, ADP payrolls number we saw yesterday. I think we really exploded into life this week yesterday in the wake of obviously the short working week for the US, the Independence Day, bank holiday and what have you. And it certainly set us up, I think, for an interesting, an interesting set of numbers. I think one thing I would say is that this particular report is probably not going to change the debate about what the Fed does later this month. You know, that's pretty much priced in. I think what we're looking at is very much a case of a 25 basis points rate hike from the Fed, the Fed Minutes this week. It's pretty much set that in stone, it was very much a skip. In fact, if I could take anything away from this week's Fed Minutes, it was the fact that how very keen a number of US policymakers were, were there not to be a pause and for them to carry on, for them to carry on hiking. And when you look at the ADP payrolls report yesterday, you can sort of understand why they wanted to hike in June. I mean, if anything, the July pause would have probably been more sensible. But then again, it would also have been much harder to articulate given what we've seen so far this week. We're looking at the jobless claims numbers. They're still fairly, they're still fairly decent, you know, 245, 246. Yes, they're higher than what they were. But if you actually look at the continuing claims numbers, they've actually been falling for the last few weeks. So there is no question that the US labor market is proving to be extremely resilient. You look at the number of job openings, the jolts report. That's fallen back under 10 million, 10 million job vacancies. When you consider that the number of vacancies pre pandemic was trending around about six or seven million. There is still an awful lot of vacancies out there that US employers aren't able to fill. One thing that I did note about the ADP report was the number of services jobs that were added during the month in travel, hospitality, leisure. So jobs that generally tend to fetch or reach a lower salary, an average lower salary than say, for example, manufacturing. I mean, when you look at the manufacturing numbers, pretty much across the globe, they're diabolical. The divergence between the two is quite notable. But I think one of the things that I have noted over the course of the past few weeks is how even though services is outperforming, services activity is also starting to slow down as well. And if you actually look at PPI, PPI inflation is pretty much non-existent. And in China and in Europe, it's a negative territory. So I think yesterday's market reaction was, I don't know, it was just a little bit overdone, I think, in terms of what rates were doing. So what we're looking at here is the US two-year. And very briefly yesterday, it's highest level since 2007, taking out the highs that we saw just prior to the banking crisis in March. What was particularly interesting was it was unable to hang on for the peaks of 5.11%. What was more interesting, however, was the fact that five and 10-year rates started to go higher as well. So the inversion of the yield curve between the 10s and 2s actually got less by about 10 and 15 basis points by virtue of the fact that the five and 10-years actually went up faster than the two-year. What does that mean? Well, essentially, it means that markets are pricing in higher rates for longer, or they think rates will stay higher for a lot longer, which is ideally what the Fed wants the markets to think. However, for the Fed to suggest that they're going to carry on hiking until something breaks again, is probably pushing your luck a little bit. And today's payrolls numbers probably aren't going to tell us anything that we don't already know about the US economy, particularly the labor market, and that remains fairly resilient. These are the numbers down the right-hand side. This is what's being expected, 225 to 235. I've got a 235 estimate for payrolls. Some whisper numbers are coming in around about 275, 280. I know Citigroup has suggested that we could see a 170 or 180, which would be on the lower end of expectations. I think one thing we can say is that not many people have a clear idea of what or how the US economy is performing, and that's me included. The data is all over the place. But what we can say, and I think what I can say with some degree of certainty is that inflation is slowing down. This time last year, US CPI was at 9.1%. Next week, US CPI should fall to 3.1% on the headline number. So that suggests that the pace of inflation is going in the right direction. It is slowing. Core price is slightly higher, 5.3%, 5.5%. So obviously that's not ideal. But a large part of the reason for that is because of the fact that employers are having to pay more money to their staff. Therefore, they're having to raise prices, and that's basically getting embedded in core. Core prices are now well above headline inflation. We're seeing the same sort of trends in Europe as well. So I think for me, I think while yesterday's ADP number was a real big blowout, I'm not sure that it means that the Fed needs to hike by another two or three times between now and the end of the year, which suggests that perhaps the market could be wrong when it's assigning a terminal rate of potentially 6% for the Fed funds rate and 6.5% for the Bank of England. Because whatever you say about the Fed for the Bank of England, it equally is true given the fact the Bank of England or UK monetary policy and UK inflation acts with a bit of a lag. It is lagging behind the US and Europe. So what are we expecting? Well, factors for a strong report today are obviously the ADP numbers yesterday. The services ISM numbers yesterday were also fairly positive. Headline number, employment was back above 50. But what was notable was that prices paid came in at its lowest levels since late 2020. So again, inflation is calling. So the bigger question that I'm having to weigh up when I look ahead and try and figure out what this market is going to do is how many more Fed rate hikes have we got left coming along? Now, I could be having this discussion with you a week from now. And we could be having a completely different discussion, particularly if US CPI on Tuesday comes in below expectations. So far from blowing off to the top side on rates, we could be coming straight back down again. I think we do have to get used to the idea of it. And when I think about what we were talking about in March and February and March of this year, the markets were still pricing rate cuts for this year back in February, March. They're no longer doing that. So in terms of what the Fed was hoping to achieve with respect to its minutes, it's job done. The market is no longer pricing rate cuts this year. So now it's really about managing expectations over and above what comes next. So obviously, we've got today's payrolls numbers, paying particular attention to the average earnings numbers, which are still around about 4.3. When I looked at the ADP numbers yesterday, the average wage numbers were around about 6.3, which again was lower than it was two or three months ago when it was around seven and a half. So wage growth is slowing. Energy prices have come down quite a bit. The biggest risk, I think, for inflation going forward is the oil prices. And other commodity prices start to go back up again. What's helped, I think, in the past 12 months is we've seen the prices of general commodities come down, supply chain disruptions have eased, container shipping prices have come down quite a lot. So again, input prices at the lowest levels for quite some time, which means that companies aren't feeling compelled to pass them on into the final cost of their goods and services. So that's the US2, yeah. So it'll be interesting to see where that goes. It's currently 5%. I'm going to change that to a one-day chart. Actually, before I do that, let me just show you the UK2 year, because that's just eye-wateringly horrible when we look at that. I mean, there's the October highs there, the old Kuateng budget. And this is what they've done since March. So they've gone from 3% to nearly 5.5% in the space of a quarter. Fortunately, an awful lot of that, all these hikes in borrowing costs, haven't been passed down to mortgage holders yet. And I think that's probably the one silver lining that I think you can take away from this recent move that we've seen in guilt yields. Savors have benefited from higher rates, albeit somewhat belatedly. If you're on a fixed rate mortgage and you've got some savings, hopefully you've got some extra cash to squirrel away in anticipation of when your mortgage rate does go up. And I think the same applies in the US, because ultimately, if you look at new home sales, over the course of the past year, they've been negative every month bar one. And that's because US rates are fixed rate when it comes to mortgages. No one wants to move because they're going to have to pay a higher rate. So where does that leave us in terms of what the markets are doing? Well, let's quickly blast through them because we've got four minutes. FTSE 100, really key support level here, around about 7,200. It's a 61.8 debonacci retracement level of the entire up move from the October lows to the all time highs in February. So we're at a really big level here on the FTSE. And I would suggest that, given the fact that we haven't seen a breakout on any of the other indexes, perhaps there's a fairly decent area of support here. What does worry me is the fact that the FTSE has been unable to rally above its previous highs. So there is significant weakness being manifested in the FTSE chart. The DAX. We've broken below this key support level here, around about 15,660. That bothers me slightly because that suggests we could see further weakness in the short to medium term. Maybe today, we could see a bit of a rally back to it because we've had a horrible week this week, worse week since March. So you'd have to wonder how much, if we get particularly negative number, how much more downside there is in the short to medium term, given the fact that we've potentially got a little bit of support coming in slightly higher up. What's been particularly notable is a lack of reaction when it comes to the S&P 500 and the NASDAQ. We still remain very much in an uptrend on both the S&P and the NASDAQ. So in terms of the numbers that we've seen this week, I'm not expecting to see too much of a reaction in response to today's payrolls reports. One thing I would say is that there was a very limited dollar reaction to yesterday's numbers. We saw big spike in bond yields, but the dollar didn't really go anywhere. And if anything, the dollar's weaker against the yen, which suggests that perhaps we could see a little bit of dollar weakness in the short to medium term, having failed to crack that 145. Now, the next support for dollar yen for me is 142.50. Why? Because we've got this move here. It's 61.8 Fibonacci retracement level. We've broken above it. We haven't been back through it. So that could be a key support level in the event of a disappointing payrolls number, which could see yields come down. So certainly, I think in terms of dollar yen, I'd be looking to see a move back to 142.50. I think now that we've broken back below 144, which was a key support. Let me quickly show you that again. That 144 level was a nice area of support. We broke below it. We've gone back through it. And now we could see a move to 142.50. So I think there's certainly potential for more dollar weakness against the yen. Euro dollar is pretty uninteresting. I'm not really expecting too much from that. What is interesting is that the rallies off this series of lows here at around about 108.20.30 keeps running out of steam. So the euro is looking a little bit sickly at the moment. But again, it's not really doing that much. It's in a range. And I would expect that to continue going forward. Gold prices obviously have been suffering a little bit from the rise in yields. And they're currently above a very key support level at around about 18.95. But again, lower highs. So that does suggest that in the short to medium term, we could will see gold continue to drift lower. So all in all, I think I pretty much covered everything on one last thing, cable. Decent support on this chart here from this trend line from the lows back in March. Decent support in and around the 50 day moving average. I still expect cable to go higher and potentially test 130 in the short to medium term. Okay, I'm going to be quiet for now and allow you guys to digest the numbers. As I say, 225 also expecting the Canada jobs report as well. Canada is a good one. Good jobs report 209 on the non farms. So pretty much in line, not much to see there in terms of the headline number. So pretty much as you were, let's look at the unemployment rates fall into 3.6% and wage growth is slightly firmer 4.4. And it's very interesting actually that the previous month for wages has also been revised higher as well. So that is it's a fairly neutral report. Let's looking at dollar Canada. Let me just drop that out of the way. Solid jobs report on dollar CAD. So we should see that drop down away from the 50 day moving average here. And that's precisely what is happening. And let me just send a quick news alert on the payrolls numbers so that everyone can get that because my PC just broke. So that was disappointing. Okay, that's gone out. Okay, so 209 not really much to see here. The Canada is the big, the big number. So we could well see dollar CAD slide back. That's exactly what we are seeing there. Fairly decent number. Does that mean we're probably going to get another rate hike from the Bank of Canada next week? Well, I think there's a decent chance we may well see that. Certainly as a leading indicator for what the Fed is likely to do just over a week from now. So decent set of jobs numbers out of Canada, decent set of numbers really I think out of the US and fairly decent wage growth on the wages numbers. We are the initial reaction has been a slightly weaker dollar, which I suppose is not really surprising when you consider what we've seen this week. Yields are lower. US two year is down now to 4.9248. Let me just bring that over so you can see. There we go. So initial reaction knee jerk is even though wage growth is slightly more resilient, was revised up in May and 4.4 and has remained unchanged at 4.4. The general consensus of the opinion is that all those concerns about a more aggressive Fed probably going to come off the table after yesterday's move. I think what you can say is probably as you were and that the ADP was a little bit of an outlier and maybe more sensible heads will prevail. Because if you think about it, what's in it for the Fed to hike by another two or three 25 basis points rate hikes if they push the US economy into a hard landing as opposed to a soft landing. You cannot react on the basis of one piece of really positive data in the same way that you can't really react negatively on the basis of one piece of negative data. It's a journey. And for me, I cannot see the Federal Reserve hiking more than so one or two more times 25 or 50 basis points. We'll definitely get 25 in July. And then really it's a question of what the data is like between now and September. And then of course we've got to look at Jackson Hole as well. So we could get some signals in Jackson Hole at the end of August. It's always a very key arbiter of where the Fed could go when it comes to its September decision. But for me, I think the terminal rate for the Fed is around about five and a half, maybe 5.75. I certainly don't think the terminal rate for the Bank of England is six and a half percent. I just can't see that. I mean, yeah, the Bank of England could hike to six and a half percent if they were so inclined. But they'd turn the UK economy into a dumpster fire. And I don't think they'd want to risk crushing the housing market. So I think inflation will come down fairly quickly. We'll continue to come down. The only question I think really central bankers need to ask themselves is they need to be a bit more patient in getting it back to 2% because I think the new baseline, it's not 2%. It's going to take a long time to get back to 2%. It could take years. I think we're looking at a baseline of around about three and a half, 4% for headline inflation over the course of the next 12 months, simply on the basis of the fact that food prices aren't going to return to pre-pandemic levels. Neither are energy prices. We're in a new normal whereby we've got the energy transition at zero and all that sort of stuff. And that is going to mean that prices are likely to remain high for quite some time to come, which means that central banks need to be sensible about how they try and meet their inflation target. They will probably need to meet it over a much longer term because I think in trying to meet it within a 12 month period, they run the risk of doing more harm than good. Right. Quick questions for you all. Are there any? Do you have any questions for me now that we've had time to digest those numbers? Because to me, that's a fairly neutral report. It reduces the possibility of the Fed, I think, overreacting or central banks overreacting when it comes to tightening monetary policy. And I think it should bring to a close a rather turbulent 24 to 48 hours. I think when you react on the basis of fairly decent ADP and a fairly decent ISM, sometimes you need to see a bit more data. And I think today's payrolls report is just the type of, it's just the sort of numbers that I think we really needed to see. To say, yeah, the US economy is doing okay. It certainly doesn't need more aggressive rate hikes. It probably needs one more. Okay. So where to for yields and equities? Yeah, I think for me, the key data point is CPI next week. I've outlined, when I post my week ahead, you'll be able to read my thoughts on it. But if I could summarize them fairly briefly, it's heading in the right direction. We're at a two year low for US CPI. That was at 4% in May. Obviously, a year ago, we were at 9.1. We are predicted to slide back further or slow down further in the June numbers to 3.1 or 3%. We could at a pinch even slip under 3%. They won't change the argument about another rate hike this month. But I think if they come in line with expectations, say 3.1%, the stuff of what will happen is that markets could start to go a little bit cooler on the idea of another rate hike in September. We could get another pause. And I think that's what central banks really do need to do now. They need to pause. I think taking a jackhammer to rates and jacking them up is going to do more harm than good. We do not know how much of the rate hikes that we've seen over the past 12 to 18 months has filtered through into the wider economy because of the amount of fixed rate deals that there are out there. So I think for me, a little bit of neutral or soft data will do the world of good when it comes to tempering the rise in yields that we've seen over the course of the past few weeks. Certainly, I think some of the air needs to be taken out of the rally that we've seen in yields and only the data can do that. So USCPI certainly is a key data point, but I'd go a step further. I look at PPI because PPI is a day after producer prices and last month US final demand PPI went negative. So that tends to be a leading indicator or what's coming down the pipe for CPI. If you look at the China's PPI numbers, they've been negative since November. In the European Union, Germany's PPI numbers on a month-on-month basis have been negative every month this year. So there is disinflation coming down through the pipe, and I think that's been reflected in the way manufacturing has been behaving over the course of the past few months. Manufacturing has been in recession for the past six months, that's been reflected in PPI. What's causing the stickiness of inflation right now is services, and even there we are starting to see evidence of that coming down. So the next three months will be very important in the overall context of the rate debate. And for me, I think as long as the direction of travel continues, we may find that USCPI for June is probably the low point and we'll start to flatline into August and September in and around that 3% level. I don't think it's going to fall in a straight line, but certainly I think CPI inflation of 3% going into September is much more preferable to the numbers that we saw at the start of this year. And if PPI can continue to look soft, then that will eventually feed in, and the UK inflation will also fall off quite significantly from the 8.7% that we're currently seeing now. But we won't start to see the effects of that until August when the July CPI print comes out and includes the lowering of the energy price gap. And it's the energy price gap that's keeping UK CPI elevated. Let's have a quick look at that very briefly. That looks as if it could be topping out. And it's quite interesting that Canada yen, actually, because if we look at this top through here, 110, there's a very big barrier there. So let me just get rid of that line. We don't need that superfluous to requirements. As is that, it is looking a little bit toppy in around 110. So certainly there's potential for yen crosses if dollar yen continues to look softer to come off. I think the key barrier, as I pointed out earlier in dollar yen was one of the key support level it was in dollar yen is at 142.50. So it'd be interesting to see how it reacts around there. But Canada yen at the moment does look as if it's found a short term peak, and could we'll start to roll over. So it's interesting to see how that plays out. Okay, another question. Do you think that a less aggressive outlook for the Fed might be bullish for gold in the coming months or will the downtrend in gold continue? I certainly think lower yields will help it. If I was looking to pick up gold, I'd certainly be looking for a little bit of a continued consolidation in and around these sorts of levels through here. But overall, I probably wouldn't be looking to get in until it was probably come back to revisit the 1850, 1860 area or the 200 day moving average. Gold has suffered quite a bit obviously on the back of the rising yields. While yields remain high, gold is probably not somewhere I'd want to be. But if we do start to see evidence of a topping out in yields, then certainly gold will benefit from that. I think the trick will be in timing that. And that's always the challenge at any given time. So let's see how the data comes over the course of the next month or so bearing in mind that we are in the summer. Gold does sometimes have a seasonal factor, a number of seasonal factors involved. But certainly I think we are approaching a level where it could well start to see a little bit of a turn and a move back towards $2,000. It's just trying to time that that could be problematic. Because I think it's quite interesting if we look at this particular chart here, is that it's really struggled to get back through 1935, 1940 over the course of the past few days. So that I think that's going to be a very key level for gold going forward. If we look at this support and resistance line through here, there's a bit of a barrier there. So it looks well supported around about 1895, 1900. But there's quite a few offers around about 1935, 1940. Any other questions, ladies and gents? Let's quickly look at the Aussie dollar after the RBA's pause earlier this week. I do think the RBA's probably got another hike left in it. Nice little trend line coming in there on the Aussie. Also got one coming in through the highs as well. There's a nice little bit of price action shaping up there on the Aussie dollar. Let's have a quick look at Brent Crude. That's pretty, I mean, to be quite honest, that's pretty uninteresting. When you consider the Saudis, the Saudi Arabians and the Russians have been cutting output for several months now. And gold, just gold, oil just does not want to go up. And that suggests to me that the demand, the market is very pessimistic about demand going forward. I think an awful lot will depend on whether or not China implements some new stimulus measures. But for the time being, crude oil is stuck in a range. Solid support just below these lows here. And to be honest, I don't think crude oil prices are going to go much lower than the lows that we've seen over the course of the past three months. And the reason for that is that there's a steady buyer last resort in terms of the Biden administration who said they want to refill the strategic petroleum reserve. So anytime it gets anywhere near $70 a barrel, you're going to get traders basically buying crude oil in anticipation that there's going to be a steady buyer on the dip, a Biden put or a Brent put, if you like, for crude oil prices. So looking at that, Brent crude looks very much a range trade, similarly for WTI and through here. Curious to see what your thoughts are on the New Zealand. Did you mean the Australian and New Zealand economy? Oh, the New Zealand dollar and the New Zealand economy got you. I think the RBNZ is done. So for the Kiwi, I would suggest that perhaps the line of least resistance is probably lower. When your rates are at 5.5%, you've got to think that there's not much left in the way of upside. And the next moving rates is likely to be lower. So I think for me, looking at the Kiwi, I think the likelihood is that we will probably see a little bit of weakness in the short to medium term. We might see a retest of these highs through here. But this little pattern here tells me that we're getting for a period of consolidation before we start to drift lower again. Certainly that does appear to be the way of it with this channel here. We're getting lower lows. We're getting lower highs. We've seen a little bit of a pull back there, but that appears to be a consolidation for the next move up or down. So I think it's probably building up for a breakout. The Kiwi is really just a question of which way we go next. Anything else anyone wants to ask me about a specific market? Okay, so if that's it, ladies and gentlemen, I think I'll wrap this up. Once again, thank you very much for listening. Just a quick reminder of what's coming up next week. We've got a Bank of Canada rate decision on the 12th. So given today's Canadian jobs report, we might see another 25 basis points hike there. It'd be interesting to see what they do there. We've also got UK wages and unemployment numbers for May, for the three months to May. Just as a reminder, wage growth came in at 7.2% for the three months to April. So it'll be interesting to see whether or not we see a dip back below 7%. And obviously, we've got US CPI and US PPI, US CPI on the 12th, US PPI on the 13th. We've got China trade for June also next week. And we've also got the start of earning season, bank earning season, US bank. So we've got the numbers, Q2 numbers from JP Morgan Chase, Citigroup and Wells Fargo. And as far as they are concerned, I'll be very interested to see whether or not they've hung onto those deposits that they got. JP Morgan got 50 billion of new deposits when it reported its numbers in Q1 because of the collapse of Silicon Valley Bank and Signature Bank, whether or not they've been able to hold on to those deposits or whether those deposits have gone elsewhere. What's the outlook for the US economy? Jamie Dimon was, he painted an upbeat outlook for the US economy in the last set of numbers. He said that consumer spending remained healthy. Be interested to see whether or not he still holds that view. So that's on Friday, a trifecta of earnings numbers from Wells Fargo, JP Morgan Chase and Citigroup. So keep an eye out for that, because they could actually introduce quite a bit of volatility as well. So thank you very much, ladies and gentlemen. I hope you all have a great weekend and I will speak to you same time, same place next month. Thanks very much for listening and have a great weekend.