April 05, 2024 12:01 GMT
Some Geopolitical Risk Premium Unwound Ahead Of NFPs
CROSS ASSET
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Pre-NFP trade has seen some of Thursday’s geopolitical risk premium pared as participants set up for the data.
- That leaves oil, bonds and the broader USD off Thursday’s best levels and equity markets off lows.
- FOMC-dated OIS shows ~72bp of ’24 cuts vs. extremes of ~65bp earlier this week.
- Sensitivity to a relatively small miss in the weekly initial jobless claims data, coupled with outright Tsy yield/FOMC-dated OIS levels and recent Fedspeak, suggests that the market is likely to see a more meaningful reaction to a soft release than it would in the case of a firm report.
- On that note, our DC team’s latest piece stressed that the Fed won't hesitate to ease if employment falters.
- We will get another raft of Fedspeak after the data.
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