Traders are awaiting the US employment figures for May at 13:30pm London. The median expectation is for the headline Non-Farm Payrolls to be +225,000 jobs (+223,000 in April), and for unemployment rate to remain unchanged at 5.4%. The Fed has signalled wage growth and the tightening labour market to be the signal to tighten monetary policy. The market consensus is for a rate hike in September 2015, however Christine Lagarde (IMF) urged the Fed to hold off until 2016 before beginning to tighten. The IMF believes that the fragile recovery could be undone by tightening, which would then lead to deflation and the need for future cuts.
The tightening labour market should begin to trickle through to prices, with a rise in inflation then being capped by a gradual hike in interest rates.
The ADP employment report on Wednesday came in at just above expectations (201,000 vs 200,000) with the USD being weak across the board this week.
The hope of a Greek deal put a strong bid into the Euro during Thursday, as markets believed that a deal would be a significant positive for the Eurozone. The market has been bound by headlines and soundbites from Athens and The Troika, as the parties attempt to reach a deal. Greece announced that they would bundle their IMF payments to the end of the month providing some reprieve for the state as it attempts to agree with creditors. Greece is playing dangerous game; the country is practically bankrupt and on the verge of a default, without a deal the likelihood is the country would have to exit the single currency, with disastrous consequences.