The Lie Of The Land Pre-NFP

A lower VIX, a move off session cheaps in core global FI markets (with U.S. Tsys 1-2bp cheaper on the day), a softer USD (albeit with the BBDXY off worst levels), firmer equities, stronger crude oil futures and little movement in FOMC dated-OIS pricing tells the market story ahead of NFPs.

• The major focal points ahead of the key data release have been increased hopes of property-related stimulus out of China (most recently aided by a BBG sources piece that we covered earlier), as well as a bounce for the Chinese yuan and equity markets after their recent tumultuous run and a hawkish repricing of RBA-dated OIS in the wake of the outcome of the Australian annual wage negotiations.
• A quick reminder that FOMC-dated OIS has moved away from recent hawkish extremes on Wednesday’s dovish overtures from Fed Governor (and Vice Chair-designate) Jefferson, as well as yesterday’s ULC print & ISM manufacturing prices paid component.
• That leaves ~8bp of tightening priced for this month and a cumulative ~18bp of tightening showing through the July gathering. Beyond there, ~39bp of cuts are currently showing by year end.