Highlights:
- Asymmetric risks around a soft payrolls print; consensus looks for +160k
- EUR prints a higher high for the fifth consecutive session
- Powell makes rare post-payrolls, pre-blackout appearance
US TSYS: Modestly Firmer On The Day With Payrolls And Powell Eyed
- Treasuries have pared modest gains seen in Asia hours ahead of today’s important docket including US NFPs and Fed Chair Powell (MNI Preview), with the move off highs in isolation to EGBs but likely helped by higher energy prices.
- Cash yields are 0.5-1bp lower across the curve, with 2Y yields at the middle of the week’s wide range (3.95% vs a range of 3.84%-4.04%) and 10Y yields at the high end (4.27% vs 4.10%-4.34%).
- 2s10s at 31.6bps (-0.3bp) is off yesterday’s recent highs above 35bps but still
- TYM5 sits at 110-30 (+ 04+) in narrow ranges ahead of payrolls. Cumulative volumes of 365k are solid for a pre-payrolls overnight session but pale in comparison to some particular active sessions seen this week.
- Yesterday’s low saw an extension of declines that are deemed corrective, after which lies support at 110-00 (Feb 7 high). A resumption of a bullish trend would see 111-15 (Mar 5 high) come into play before 112-01 (Mar 4 high).
- Data: Nonfarm payrolls Feb (0830ET), Consumer credit Jan (1500ET)
- Fedspeak: Bowman (1015ET), Williams (1045ET), Kugler (1220ET), Powell (1230ET) and Kugler (1300ET) – see STIR bullet.
STIR: Three Cuts For 2025 Ahead Of Payrolls And Powell et al
- Fed Funds implied rates are towards the dovish end of recent ranges ahead of an important docket starting with nonfarm payrolls at 0830ET before a deluge of Fedspeak, including Fed Chair Powell, on the last day before the media blackout.
- Following an unusually large dovish reaction to an admittedly weak Challenger job cuts report yesterday, sensitivity to a hawkish NFP report could be growing.
- Cumulative cuts from 4.33% effective: 2.5bp Mar, 13bp May, 31bp Jun and 75bp Dec.
- All the scheduled speakers are permanent voters and can have an impact when offering their takes after payrolls but Powell is of course the pick. We provide much more context for Powell on pg 5 of the MNI US Payrolls Preview.
- 1015ET - Gov. Bowman (perm. voter, hawk) on policy transmission post-Covid (text + Q&A)
- 1045ET - NY Fed’s Williams (perm. voter, dove) on policy transmission panel (text + Q&A)
- 1220ET - Gov. Kugler (perm. voter, center) on rebalancing labor markets (text + Q&A)
- 1230ET - Chair Powell (perm. voter, leaning dove) on economic outlook (text + Q&A)
- 1300ET - Gov. Kugler (perm. voter, center) on policy transmission and labor market panel (just Q&A)
ECB VIEW: Analysts Drifting More Hawkish, Still On Balance See April Cut
- Building on Goldman Sachs, Morgan Stanley and Nomura over the week ahead of the ECB, we have seen four call changes since yesterday's ECB decision.
- ING see the largest post-decision change, lifting their terminal rate call by 50bps to 2.25%, whilst ABM Amro, Nord/LB and Rabobank formally call for an April pause (before a final cut in June in Rabobank's case).
- Many others also see a skew of hawkish risks to their calls. Deutsche Bank for instance see scope for 2027 rates being 50bp higher than their current forecast.
- Analysts lean a little more towards another cut in April than ESTR ECB-dated OIS which showed it broadly a 50/50 call. Of the 30 reviewed below, 18 look for a next cut in April vs 7 for June and 5 undecided or otherwise.
- Terminal rate expectations continue to range from 1.00% to 2.25% (i.e. not a single analyst expects rates to stop at latest levels) but there is much greater concentration at 2.25/2.00% than the low end.
STIR: OI Points To Limited SOFR Positioning Swings On Thursday
OI data points to relatively limited net positioning swings in SOFR futures on Thursday, with markets focused on today’s NFP release.
- A mix of net long setting and short cover was seen through the greens, with net short setting and long cover then seen in the blues.
| 06-Mar-25 | 05-Mar-25 | Daily OI Change |
| Daily OI Change In Packs |
SFRZ4 | 1,069,492 | 1,058,765 | +10,727 | Whites | -2,286 |
SFRH5 | 1,317,956 | 1,334,456 | -16,500 | Reds | +6,352 |
SFRM5 | 1,121,001 | 1,107,329 | +13,672 | Greens | +4,122 |
SFRU5 | 908,238 | 918,423 | -10,185 | Blues | -1,077 |
SFRZ5 | 979,976 | 976,408 | +3,568 |
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SFRH6 | 629,232 | 635,113 | -5,881 |
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SFRM6 | 598,400 | 596,504 | +1,896 |
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SFRU6 | 582,024 | 575,255 | +6,769 |
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SFRZ6 | 769,515 | 769,567 | -52 |
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SFRH7 | 458,996 | 453,596 | +5,400 |
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SFRM7 | 455,202 | 452,939 | +2,263 |
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SFRU7 | 301,406 | 304,895 | -3,489 |
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SFRZ7 | 381,068 | 377,271 | +3,797 |
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SFRH8 | 214,188 | 215,283 | -1,095 |
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SFRM8 | 174,520 | 177,247 | -2,727 |
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SFRU8 | 122,173 | 123,225 | -1,052 |
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EUROPE ISSUANCE UPDATE:
Belgium ORI Results:
- E300mln of the 3.00% Jun-33 OLO. Avg yield 3.182% (bid-to-cover 2.28x).
- E200mln of the 2.85% Oct-34 OLO. Avg yield 3.319% (bid-to-cover 3.25x).
EU: Hungary The Sole Holdout On Ukraine Support At EUCO
As was largely expected, Hungarian Prime Minister Viktor Orbán proved the sole holdout when it came to the EU's joint conclusions on supporting Ukraine at the 6 March special European Council summit. While the EU was able to unanimously back a set of conclusions supporting a major increase in defence spending across the Union, Orbán refused to give his approval to sections regarding increased military support and security guarantees for Ukraine. Instead, the remaining 26 member states backed this section as an 'extract'.
- In terms of the short-term impact for Ukraine, the lack of a commitment to an immediate and sizeable aid package will come as a major concern given the pause in US military and financial aid and intelligence cooperation. European Council President António Costa appeared to show little concern that Hungary would block the rollover of sanctions on Russia, saying Budapest had backed all 16 packages so far.
- With regards the longer-term objective of raising EU defence spending as part of the Commission's 'ReArm Europe' plan, while member state leaders offered their support, the details and eventual execution of the EUR800B project remain vague and in extremely early stages at present. As The Guardian reports "Member states would still have to agree to the €150bn loans scheme, while it is unclear if governments would make full use of the €650bn financial leeway the commission suggests."
EUROZONE DATA: Unit Labour Cost Growth Weaker Than Expected In Q4
Eurozone GDP deflator growth eased to 2.44% in Q4, down from 2.72% in Q3 for the seventh consecutive deceleration from a high of 6.51% in Q1 2023. This was in line with the ECB’s March macroeconomic projections. Decelerations were seen in Germany, Spain and France, but accelerated in Italy. The deceleration came as unit labour cost (ULC) growth eased to 3.8% Y/Y (vs 4.5% prior), below the ECB’s 4.1% projection. Although the March ECB decision signalled a more cautious approach to monetary policy going forward (with policy now "meaningfully less restrictive"), the ULC developments underscore that more rate cuts are in the pipeline. However, the regularity of future cuts will be determined by more timely economic data alongside trade, geopolitical and fiscal developments.
- Unit labour costs contributed 1.80pp to the annual GDP deflator print, down from 2.14pp in Q3. The deceleration in the annual rate was largely due to weaker-than-expected compensation per employee growth (4.09% Y/Y vs 4.46% prior and 4.3% expected by the ECB). Meanwhile, there were offsetting contributions from real productivity per hour worked (0.1% Y/Y vs 0.4% prior) and total hours worked (1.1% Y/Y vs 0.6% prior).
- The ECB expects unit labour cost growth to continue decelerating, particularly in 2026/2027 as a result of falling wage and rising productivity growth.
- Unit profit growth remained soft at -0.4% Y/Y for the third consecutive quarter, pulling deflator growth down by 0.18pp (vs -0.15pp contribution prior). The quarterly reading at least picked up a little to 0.3% Q/Q (vs 0.0% prior).
- This is reflective of weak corporate pricing power in the Eurozone – particularly in manufacturing – which has been a running theme in recent PMI reports.
- The ECB expect unit profit growth to “recover somewhat from 2025, aided by the economic recovery, strengthening productivity growth and a temporary boost in 2027 related to the statistical treatment of ETS2”
- Unit taxes and subsidies added 0.81pp to deflator growth.
GERMANY: Union/SPD Migration Alignment After Turmoil Threatened Debt Deal (BILD)
CDU/SPD and SPD have reached common ground on migration policy according to a media report, after earlier reports that misalignment on "suspension of family reunification" threatened the debt deal announced on Tuesday.
- Some members of the CDU caucus view SPD approval on that as conditional on them passing the debt deal announced on Monday (which more fiscally conservative parts of CDU still appear to view critically).
- An initial BILD article reported that SPD firmly opposes the suspension of family reunification - however, as mentioned, there are already new reports that a CDU/SPD agreement was reached here internally.
- That would also be in line with our own perspective - we would be surprised if SPD and CDU ultimately fail to push through the debt deal on internal misalignments following Tuesday's public announcement.
FOREX: EUR Extends Winning Streak, 5 Sessions of Higher Highs
- EUR/USD has extended this week's winning streak despite a more stable European bond market, meaning EUR/USD has posted higher highs in each of the past five sessions, putting the pair closer within range of the $1.0900 handle.
- Antipodean currencies are seeing little reprieve from Trump's decision to avoid the immediate impact of the harshest tariffs against Canada and Mexico. As such, AUD and NZD have rolled off the midweek highs against the dollar, further cementing the 100-dma as near-term resistance in AUD/USD, having posted a failed break on two separate occasions now.
- This leaves the USD mixed against most others, and the USD Index softer. The USD Index is comfortably through the 104.00 handle having closed below Thursday confirming a further close of the pre-election gap. Technical support here undercuts at 103.373 and 102.521.
- In a rare post-payrolls appearance, Fed Chair Powell is set to speak on the economic outlook just a few hours after the NFP print. Text is set to be released, with a subsequent Q&A. Importantly, this means Powell makes one of the final Fed appearances before the media blackout kicks in at the close today.
- Payrolls are expected to print at +160k today - and we don’t expect federal government layoffs and freezing hires to materially show in this report, but the seasonality of the data leaves it susceptible to broader pausing in hiring plans. The unemployment rate is seen holding at 4.0% after a surprise drop in January, in a close call with 4.1%.
EQUITIES: Sell-Off in E-Mini S&P This Week Reinforces Short-Term Downtrend
- The trend in the Eurostoxx 50 futures contract remains bullish with price trading closer to its recent trend highs. Key short-term support has been defined at 5373.00, the Mar 4 low. A reversal lower and a break of this level would signal scope for a deeper retracement and expose the 50-day EMA at 5299.82. For bulls, a continuation higher would open the 5600.00 handle next.
- A bear threat in S&P E-Minis remains present and a sharp sell-off this week reinforces a short-term downtrend. The contract traded to a fresh short-term cycle low again, Thursday, marking an extension of the current bear leg. This reinforces a stronger reversal and a double top pattern on the daily scale. The focus is on 5698.25, a Fibonacci retracement. Initial firm resistance to watch is 6002.65, the 50-day EMA.
COMMODITIES: Trend Condition in Gold Unchanged and Bullish
- The current bearish trend condition in WTI futures remains intact and this week’s fresh short-term cycle lows reinforce current conditions. Recent weakness has resulted in a clear breach of support at $70.20, the Feb 6 low. This confirmed a resumption of the downtrend that started Jan 15 and has paved the way for an extension towards $63.61 next, the Oct 10 ‘24 low. Key short-term pivot resistance is seen at $70.68, the 50-day EMA.
- The trend condition in Gold is unchanged, it remains bullish and the recent pullback appears to have been a correction. A stronger rally would refocus attention on $2962.2, a Fibonacci projection. This would also open the $3000.0 handle. On the downside, a resumption of weakness would instead suggest scope for a deeper correction and expose support around the 50-day EMA, at $2820.3. The 50-day average marks a key support.
| Date | GMT/Local | Impact | Country | Event |
| 07/03/2025 | 1330/0830 | *** |  CA | Labour Force Survey |
| 07/03/2025 | 1330/0830 | *** |  US | Employment Report |
| 07/03/2025 | 1515/1015 | US | Fed Governor Michelle Bowman | |
| 07/03/2025 | 1545/1045 | US | New York Fed's John Williams | |
| 07/03/2025 | 1720/1220 | US | Fed Governor Adriana Kugler | |
| 07/03/2025 | 1730/1230 | US | Fed Chair Jerome Powell | |
| 07/03/2025 | 1800/1300 | US | Fed Governor Adriana Kugler | |
| 07/03/2025 | 2000/1500 | * | US | Consumer Credit |