As usual, we have a heavy set of US data during the first week of the month :
- ISM advanced indicators, which gives short term information about US economy. Manufacturing sector remains dynamic (56.3, close to the highest level), while services disappoint at 53.9. We note as well that price component is moving higher, which bodes well for future inflation prints. These decent pieces of data were not enough to break the relentless move lower in USD and US bond yields until Thursday
- Today, employment report was out and came as a positive surprise : payrolls are high, and average hourly earnings slightly better than expected. Shortly thereafter, Gary Cohn, Trump’s administration man on economic issues, said they were working on a plan to reduce corporate taxes and boost cash repatriation. These events broke the trend and the dollar ends the week close to its beginning level.
This data strengthens our view that the American economy is in good shape. We continue to think that markets do not anticipate enough Fed hikes.
We note as well the sharp move higher in Euro inflation breakevens, helped by the rise of Brent.
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