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Bill Diviney, Senior Economists at ABN AMRO, points out that markets will be more sensitive to the US employment data due on Friday, more than the Federal Reserve.  

Key Quotes:  

“Markets will be particularly sensitive to incoming data as we approach the next FOMC on 30-31 July, when we expect a 25bp cut. The key question for markets remains whether the Fed will cut 25bp or 50bp, rather than whether they will cut at all; a 25bp cut is fully priced by OIS forwards, while a 50bp cut is 2/3 priced.”

“Tomorrow’s June nonfarm payrolls will therefore attract even more attention than usual, particularly given the May number was a very weak +75k (the Jan-April average was +195k). Consensus expects a +160k print, and our forecast is a little higher at +170k, given the likelihood of some payback for the May weakness. A somewhat weak print (120-150k) would not have a significant market impact, but if we were to see another sub-100k reading, markets would likely take it to mean a higher likelihood of a 50bp rate cut, at least as a kneejerk reaction.”

“For the Fed, we doubt such a figure would be enough by itself to lead to a 50bp cut, and so we suspect such a market reaction would not last (by the same turn, we doubt a strong print would derail cuts).”