US Job Growth Slows as Unemployment Inches Up, Exposing Fragility Beneath the Surface

Economic

Summary:

June's labor report is expected to show weaker job growth and a rise in the unemployment rate to 4.3%, reflecting policy-driven uncertainty and cooling hiring conditions despite steady wage gains....

Hiring Momentum Continues to Fade

The U.S. job market appears to have lost further steam in June, with consensus expectations pointing to the weakest employment growth in months. Nonfarm payrolls are projected to increase by only 110,000 positions, a marked deceleration from May's revised figure of 139,000. The unemployment rate is forecast to rise to 4.3%, the highest level since October 2021, and a signal that job creation is no longer sufficient to absorb the expanding working-age population.

This shift reflects broader uncertainty driven by the Trump administration’s policy agenda, which has increasingly unsettled business sentiment. With tariffs tightening cost structures, mass deportation efforts disrupting labor supply, and government spending cuts pressuring demand, employers appear more hesitant to commit to expansion. These trends mark a stark contrast to the post-election optimism that initially drove confidence and hiring late last year.

Wage Growth Remains Strong, But Insufficient to Offset Risks

Despite weaker employment figures, average hourly earnings are expected to rise by 0.3% in June, maintaining a year-over-year growth rate of 3.9%. This relatively solid wage trajectory suggests labor markets retain some underlying tightness. However, the Federal Reserve is unlikely to interpret these figures as a catalyst for immediate rate adjustments. Policymakers appear determined to wait for more clarity on how the administration’s policies will influence inflation before taking further action.

Fed Chair Jerome Powell’s recent comments confirm this stance. He emphasized caution, pointing out that while inflationary pressures remain a key concern, the full impact of tariffs has yet to materialize in price data. As a result, a July rate cut appears unlikely, although a shift in labor dynamics could reopen the discussion by September.

Structural Softening Emerging in Hiring Patterns

One of the most notable aspects of the current labor climate is not mass layoffs, but rather the steady erosion of hiring momentum. Employers, still recovering from pandemic-era labor shortages, have largely avoided significant job cuts. Instead, they are pulling back on new hiring, resulting in fewer opportunities for job seekers and a gradual uptick in unemployment.

Survey data from the Conference Board supports this view, showing a sharp decline in the share of consumers who believe jobs are “plentiful”—now at its lowest level in over four years. This shift in perception may indicate waning confidence in labor market resilience and could influence both spending behavior and broader economic sentiment.

Policy Drag from Immigration and Tariffs

The administration’s immigration crackdown is also altering the labor market’s structural dynamics. With hundreds of thousands of migrants losing legal protections, the labor pool is contracting, reducing the number of jobs needed to maintain stable unemployment. Some economists argue that job growth of less than 100,000 per month could now be enough to prevent further increases in the unemployment rate.

However, the composition of job gains is changing. The healthcare sector remains a strong contributor, while leisure, hospitality, and construction may be experiencing reduced activity as a result of migrant labor disruption. Manufacturing employment continues to be affected by tariff-related uncertainty, and this weakness is unlikely to reverse until trade policy stabilizes.

Federal Job Cuts Not Yet Fully Reflected in Data

Another factor with long-term implications is the federal government’s campaign to downsize its workforce. While layoffs and voluntary retirements have begun, economists suggest the full effects may not be visible until later in the year. Michael Gapen of Morgan Stanley anticipates that payroll data will reflect these changes more significantly by October, unless legal obstacles delay further implementation.

In the meantime, moderate losses in federal employment persist, contributing incrementally to the overall cooling of job growth.

Outlook Points to Gradual Softening Ahead

With job growth slowing, unemployment rising, and policy headwinds mounting, the labor market may be entering a transitional phase. While headline figures may not yet justify an immediate policy shift, the underlying trends suggest growing fragility. If these dynamics persist, they could ultimately push the Federal Reserve to revisit its cautious stance and consider rate reductions by the third quarter of the year.

For now, investors and policymakers alike are watching closely for revisions to prior months’ employment data. Given recent downward adjustments, there is reason to suspect that June’s initial figures may also be overly optimistic. This possibility further strengthens the case for analyzing broader trends rather than overemphasizing one month’s outcome.

Source: Reuters

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James Whitman

Central Bank

Political

As US President Donald Trump and his advisers begin weighing replacements for Federal Reserve (Fed) chair Jerome Powell, they’re running into one significant complication: It’s not clear that Powell will leave the US central bank next year.

The Fed chief has repeatedly declined to say whether he will step down when his four-year term as chair expires in May, or remain on the Fed board — something he could technically do until his tenure as a governor expires in January 2028. The prospect of Powell remaining at the central bank has prompted administration officials to begin planning for multiple scenarios for his replacement, as Trump seeks a chair who will support his economic agenda.

The president said on Tuesday he has “two or three top choices” to potentially succeed Powell, but declined to name them. In recent weeks, Trump’s advisers have even discussed with him the possibility that Scott Bessent could simultaneously serve as the Treasury secretary and Fed chair, according to people familiar with the matter. Such a move would be unprecedented since the two roles were separated in 1935, in legislation aimed at giving the Fed a measure of independence.

“Any reporting suggesting that the President is considering having Secretary Bessent serve as both the Treasury secretary and Fed chairman concurrently is absolutely fake news,” a White House official said.

A Treasury spokesperson pointed to Bessent’s comments earlier this week on his potential candidacy. “I will do what the president wants, but I think I have the best job in DC,” he said on Bloomberg TV.

As the selection for a new Fed leader unfolds, the president has made clear the next chair must be “somebody that wants to cut rates”. Powell has led his colleagues in standing pat this year, saying they need more certainty that Trump’s tariffs won’t trigger a persistent rise in inflation.

When asked about his tenure on Tuesday in a panel discussion with fellow central bankers from around the world, Powell said, “I have nothing for you on that.”

Powell’s circumspection has frustrated some of Trump’s advisers, who are taking the silence as an attempt to push back against the president’s desire for more influence on monetary policy, according to people familiar with the matter.

If he did stay on as a Fed governor, Powell would leave Trump with just one scheduled opportunity to fill a board slot — governor Adriana Kugler’s, whose term ends in January — until the president’s final year in office.

Bessent, publicly acknowledging Powell could stay, said in a Bloomberg TV interview on Monday one idea would be to fill Kugler’s slot with the person who would later be elevated to chair. Choosing an existing governor is another option, he said.

Powell’s coyness has raised speculation that he could stay on the board if Trump picks a nominee who is overly deferential to the president’s demands, said Neil Dutta, the head of economic research at Renaissance Macro. “That’s the leverage Powell has right now by not declaring his intentions.”

Pressure rises

While Trump has sometimes speculated about firing Powell, a May Supreme Court ruling raised the hurdle for that, without having legal “cause”.

Pressure on Powell heated up further on Wednesday, with Trump’s housing-finance chief, Bill Pulte, accusing Powell of misleading lawmakers about Fed building renovations. Pulte claimed the issue was sufficient to remove him “for cause,” and the president later posted on social media that Powell “should resign immediately”.

The supercharged political environment surrounding the US central bank makes the upcoming chairmanship decision all the more sensitive than it usually is. Typically, Fed chairs retire from the central bank when their terms at the helm end, but the political backdrop has rarely been as tense as today’s.

Governor Michael Barr took the step in February of resigning as the vice-chair for supervision, while remaining on the board — constraining Trump’s options for reshaping the board. “The independence of the Fed is critical to our ability to meet our statutory mandates,” Barr emphasised that month.

Christopher Waller, a current governor who was nominated for the Fed board by Trump in his first term, is one option for the chair job. Kevin Hassett, the White House’s National Economic Council director and ex-Fed official Kevin Warsh are also top contenders from outside the Fed, people familiar with the matter said. Former World Bank president David Malpass has also been floated.

Powell’s influence

Trump’s nominee would need to be confirmed by the Senate, and Republicans’ narrow majority means they couldn’t lose more than three votes for the pick.

Powell has often declined to answer politically tinged questions related to Trump amid the president’s steady stream of criticism.

“I’m very focused on just doing my job,” Powell said this week when asked about Trump’s attacks. “The things that matter are using our tools to achieve the goals that Congress has given us.”

Sarah Binder, a professor of political science at George Washington University, said “it’s a sort of a defensive mechanism” to forgo specific comment on when he will leave. “My guess is Powell doesn’t see it in his interest, but really in the Fed’s interest, to engage with the president at all.”

If Powell did remain on the board, he could continue to influence policy decisions made by the 19-person interest-rate setting Federal Open Market Committee, having worked with most members for years. Rate moves are made by majority vote, and it’s unclear what sway the new chief might have, especially if the candidate came from outside the current board.

“He’s developed a lot of loyalty among the governors and Fed staff who I expect would remain loyal to him” if Trump picked a “toady”, Dutta said. “The problem Trump has created for the next chairman is making his desire for rate cuts so obvious that it becomes very challenging for that person. You look like a political stooge.”

Source: Theedgemarkets

Risk Warnings and Disclaimers

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Gerik

Economic

Anticipating Market Reactions to High-Stakes Events

Institutional investors are positioning themselves for what is expected to be a highly turbulent period across global markets. Multiple upcoming political and economic flashpoints—ranging from U.S.-EU tariff decisions to pivotal data releases and European budget votes—are likely to drive volatility across equities, credit, currencies, and commodities. Many asset managers warn that while risk is elevated, markets appear to be pricing in relatively benign outcomes, making them particularly vulnerable to negative surprises.

April La Russe from Insight Investment remarked that despite the density of looming risks, there is a notable absence of corresponding risk premiums in asset pricing. This mismatch has prompted several investment firms to reduce exposure to areas like corporate credit and certain sovereign bonds.

Tariff Uncertainty and Credit Exposure

The July 9 U.S.-EU tariff deadline marks the first in a series of key geopolitical hurdles. According to Van Luu of Russell Investments, markets are currently pricing in a moderately constructive outcome, such as a 10% flat tariff or a temporary delay in implementation, akin to previous U.S.-China trade negotiations. However, the possibility of a breakdown—especially if Brussels fails to secure exemptions for major sectors—could reignite fears of retaliatory tariffs.

This uncertainty has led Luu to downgrade corporate credit positions, arguing that current yields do not sufficiently reflect the potential downside risks to global trade and economic performance. Amundi’s Mahmood Pradhan noted that risky assets have already absorbed much of the good news, following a 24% rebound in global equities since early April. The implication is that even a favorable outcome may not deliver further upside.

Currency Volatility and Treasury Pressure

The U.S. dollar, already 10% weaker year-to-date, stands exposed to significant cross-currency fluctuations depending on the tariff outcome. Analysts from Artemis and Russell Investments highlighted that any collapse in trade talks could undermine the dollar’s safe-haven status, prompting a sell-off in Treasuries. This would reverse the long-standing trend of foreign capital flowing into U.S. government bonds, which has been underpinned by the dollar’s dominance in global trade.

Meanwhile, gold—currently up more than 25% this year to $3,344—faces the risk of a sell-off should trade negotiations resolve positively. Michael Nizard of Edmond de Rothschild suggested that institutional investors and hedge funds may take profits in such a scenario, particularly if broader market confidence stabilizes.

U.S. Labor Data as a Hidden Catalyst

Beyond the tariff calendar, upcoming U.S. employment data could pose an even larger threat to market stability, particularly the August 1 report, which coincides with a seasonal dip in market liquidity. Both Luu and Liam O'Donnell of Artemis identified U.S. labor statistics as a potential surprise driver of market moves, given their underappreciated influence and recent deviation from expectations.

Volatility indicators in major currency pairs, especially involving the Japanese yen, also appear too subdued. Historically, the yen has surged during periods when expectations of U.S. rate cuts increase, suggesting traders may be underestimating the scale of possible movements.

European Fiscal Instability Reemerges

In Europe, markets face renewed fiscal stress signals. France’s upcoming July 14 vote on its proposed budget—intended to address the euro zone’s largest deficit—is drawing investor concern. Although Prime Minister Francois Bayrou narrowly survived another no-confidence motion, analysts question his ability to push fiscal reforms through a fragmented parliament.

Germany’s fiscal expansion, supported by new business tax incentives up for vote on July 11, adds to the broader picture of rising sovereign debt supply. Benchmark Bund yields have already climbed 25 basis points this year to approximately 2.62% due to expectations of increased issuance. The current yield premium of 70 basis points that France pays over Germany may be insufficient to reflect the rising fiscal uncertainty, prompting RBC Wealth Management to advise reducing exposure to French sovereign debt in the short term.

In the UK, fiscal credibility is again in question following government reversals on welfare reform, with the potential to widen the deficit and drive bond yields higher.

As investors move into July and August, the intersection of unresolved trade negotiations, critical economic data, and fragile European politics is setting the stage for significant asset repricing. While some markets reflect cautious optimism, the weight of unresolved risk points to an environment where underestimating volatility could prove costly. Investors appear to be repositioning in anticipation not only of directional moves, but also the likelihood of sharp fluctuations across global financial markets.

Source: Reuters

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Risk Warnings and Disclaimers

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Blue River

Forex

Technical Analysis

GBP/CAD just threw down a big red candlestick after tagging new 2025 highs!

Is this just a breather or the start of a longer-term downswing?

We’re eyeing a major support zone that could decide whether the bulls step back in or call it a day.

GBP/CAD: Daily

GBP/CAD Daily Forex Chart

Sterling slipped across the board after traders started doubting whether Chancellor Reeves still had solid backing from the government, especially after it watered down benefit cuts she had championed to balance the budget.

At the same time, the Canadian dollar drew strength from rising oil prices, growing hopes for Fed rate cuts, and fresh optimism over U.S. trade deals.

Was this the start of a longer-term slide for GBP/CAD, or just a temporary stumble before the bulls regroup?

Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your homework on the British pound and the Canadian dollar, then it’s time to check out the economic calendar and stay updated on daily fundamental news!

GBP/CAD is closing in on the 1.8400 to 1.8500 zone, a key support area that lines up with the S1 Pivot Point at 1.8377, the 100 SMA, and a trend line that has kept sellers in check since January.

If buyers show up with hesitation wicks and green candlesticks, we could see a bounce from this trend line area and a possible move back toward 1.8800 or even fresh 2025 highs.

But if the bears break through with strong red candles and hold below the trend line, the pair could slide toward the S2 Pivot at 1.8079 or the 1.8000 psychological level. That kind of move might flip the longer-term uptrend on its head!

Whichever bias you end up trading, don’t forget to practice proper risk management and stay aware of top-tier catalysts that could influence overall market sentiment.

Source: BabyPips

Risk Warnings and Disclaimers

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Gerik

Economic

Bond

Tokyo’s Strategic Bond Move: Japan Eases Market Fears With Strong 30-Year Sale

Japan’s Ministry of Finance (MOF) pulled off a smoother-than-expected auction of 30-year government bonds on Thursday, calming market anxiety over potential turbulence in long-term debt markets. With a bid-to-cover ratio of 3.58—the highest since February—investor appetite for Japanese sovereign debt remained robust, despite recent global volatility in long-maturity bonds.

The auction’s tail (the difference between the average and lowest accepted price) came in at 0.31, down from 0.49 in June, reinforcing market confidence in the issuance process. The result came on the heels of last month’s MOF announcement to cut the issuance of long-dated bonds—a decision aimed at reducing upward pressure on yields amid rising concerns about fiscal sustainability.

Market Strategy: Advance Signaling Works

Analysts had anticipated stable demand given how well the auction was telegraphed. Westpac’s Martin Whetton called the result “not stellar, but good enough,” indicating that the positive outcome was largely baked into investor expectations. In effect, the auction served as a “buy-the-rumor, sell-the-fact” event, with Japanese bond futures holding losses and yields nudging slightly higher post-auction—30-year yields rose 2 basis points to 2.901%.

The result reflects a careful balancing act by Japanese authorities, who have managed to calm short-term volatility even as they face intense structural pressures from a globally synchronized rise in yields, especially in the U.S. and U.K.

Policy Context: Lower Supply, Softer BoJ Exit

The MOF’s decision to reduce long-term debt issuance by ¥3.2 trillion ($22 billion) through March 2026 has helped temper bond market fears. Meanwhile, the Bank of Japan has committed to slowing its bond purchase taper, a clear signal to avoid any abrupt tightening in domestic financial conditions.

Earlier this week, Japan also enjoyed relatively strong demand in its 10-year bond auction, setting the stage for Thursday’s success and boosting confidence in the market's ability to absorb debt issuance even as local institutional buyers—such as life insurers—pull back from long-dated maturities.

Political and Structural Risks Remain

Despite the positive auction outcome, underlying structural risks linger. The upcoming upper house election is introducing new fiscal uncertainties, with Prime Minister Shigeru Ishiba campaigning on ambitious economic promises, including a ¥1 quadrillion economy and wage hikes.

Policy chief Itsunori Onodera has already warned that Japan’s fiscal stance is under a “yellow alert,” suggesting that spending pressures could resurface regardless of recent market stability. This leaves the government with a narrow path: managing funding costs in the face of demographic pressures, rising interest rate norms globally, and a political environment prone to populist spending.

A Tactical Win in a Strategic Battle

Japan’s successful 30-year bond auction is a tactical victory in a broader fiscal challenge. While the Ministry of Finance and Bank of Japan have temporarily reassured investors with reduced supply and policy clarity, the structural task of maintaining long-term fiscal health in a low-growth, aging economy remains daunting.

As elections loom and the global rate environment remains uncertain, Tokyo’s ability to navigate the long end of its bond curve without triggering yield spikes or investor flight will continue to be tested.

Source: Bloomberg

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Risk Warnings and Disclaimers

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Gerik

Economic

U.S. Reverses Chip Design Software Curbs in Key Shift on China Tech Policy

In a notable policy reversal, the Trump administration has removed export license requirements for U.S. companies selling chip design software to China. The move is part of a broader trade agreement finalized last week between Washington and Beijing that seeks to de-escalate tensions in the high-tech sector and restore critical supply chains.

The decision affects the world’s three leading providers of electronic design automation (EDA) tools—Synopsys Inc., Cadence Design Systems Inc., and Germany’s Siemens AG—all of whom had been subject to licensing restrictions imposed in May. Those curbs had disrupted commercial activities by requiring companies to seek prior U.S. government approval to sell to Chinese clients.

According to company statements, Siemens has already restored full access to its software for Chinese customers. Synopsys and Cadence are in the process of resuming services, signaling an immediate operational impact. The U.S. Commerce Department has not issued public comments on the change.

Part of a Broader Trade Deal Linking Tech and Resources

The easing of EDA software restrictions forms a key pillar of the new trade accord. In exchange, China has pledged to expedite export approvals for rare earth minerals, a vital input for electronics and defense industries. The agreement also includes U.S. permission for shipments of ethane and jet engines to China—two sectors previously facing increasing regulatory scrutiny.

This marks a strategic trade-off: the U.S. regains access to critical mineral flows and commercial stability for major tech firms, while China regains access to essential design tools for its semiconductor ambitions.

Reversing a Short-Lived But Symbolic Escalation

The May restrictions on EDA tool sales were part of a broader campaign by the Trump administration to curb China’s progress in advanced computing and artificial intelligence. They followed years of export controls on high-end chips and semiconductor manufacturing equipment. While short-lived, the EDA restrictions signaled a willingness to broaden the tech blockade to upstream, software-based chokepoints in the chip design process.

EDA tools are vital for the creation of everything from Nvidia’s most advanced GPUs to more basic analog components. Their importance lies in the fact that without access to tools from Synopsys, Cadence, and Siemens, China’s domestic chip industry would be severely hampered—even with physical manufacturing capacity.

Strategic Implications: Tech Detente or Tactical Pause?

The removal of these curbs is a significant gesture but may reflect a tactical pause more than a lasting detente. While the move benefits U.S. firms with significant exposure to China, such as Synopsys and Cadence, it also opens a narrow window for China’s semiconductor ecosystem to regain access to essential design software.

It remains unclear how long this policy stance will last, especially with political pressure mounting around national security and tech dominance. The balance of trade-offs—minerals for software—indicates that both sides are trying to stabilize a strategically fragile supply chain landscape without compromising on core security red lines.

A Reset in Tech Trade, Not a Repeal of Rivalry

The U.S. lifting of chip design software restrictions is a calculated concession in a broader trade agreement aimed at restoring a degree of cooperation in tech and critical resources. While the move brings temporary relief to both U.S. suppliers and Chinese buyers, the broader rivalry in semiconductors, AI, and digital sovereignty remains intact.

With the Biden-Trump policy continuum still evolving and technology remaining central to global economic power, this rollback signals more of a realignment than a retreat. The real test will be whether mutual access is preserved or re-constrained as broader geopolitical dynamics shift.

Source: Reuters

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Risk Warnings and Disclaimers

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Gerik

Commodity

Oil Pulls Back as Trade Momentum Meets Supply Uncertainty

Oil prices declined on Thursday following their biggest single-day gain in nearly two weeks. Brent crude hovered near $69 per barrel, and West Texas Intermediate (WTI) remained above $67, as market sentiment shifted from geopolitical risk to ongoing trade developments and the upcoming OPEC+ meeting.

President Donald Trump’s announcement of a new trade agreement with Vietnam—following similar deals with the UK and China—helped fuel Wednesday’s 3% oil price surge. The agreements come ahead of the July 9 deadline to finalize trade terms, easing investor fears of widespread tariff escalations that could dampen global energy demand.

However, analysts suggest the trade-driven rally may be short-lived as attention now pivots to OPEC+ negotiations, where the cartel is expected to raise production quotas in August.

OPEC+ Decision Looms Large Over Price Direction

Market participants are exercising caution ahead of Sunday’s OPEC+ meeting. The alliance, led by Saudi Arabia and Russia, is widely expected to approve a substantial increase in output, responding to seasonal demand strength and recent supply constraints.

ING’s Head of Commodities Strategy, Warren Patterson, noted that while trade optimism gave oil prices a temporary lift, "the sustainability of this move will likely be short-lived" due to the market’s reluctance to build positions ahead of the U.S. holiday weekend and the OPEC+ decision.

Any aggressive supply expansion could offset recent gains driven by Middle East tensions and U.S. trade progress, making the weekend’s outcome a key inflection point for market direction into mid-July.

U.S. Inventory Trends Signal Mixed Fundamentals

On the supply side, the latest data from the U.S. Energy Information Administration revealed that nationwide crude inventories rose by 3.8 million barrels last week—marking the first increase since May. However, stockpiles at Cushing, Oklahoma—the primary U.S. oil hub—fell for the fourth consecutive week and are now at their lowest seasonal level since 2014.

This divergence highlights a complex demand picture. While national builds suggest some softening, regional draws and ongoing heat waves across the U.S. are propping up short-term consumption. The current driving season, coupled with elevated air conditioning usage, has lent support to gasoline and fuel demand.

Market Structure Reflects Lingering Tightness

Despite Thursday’s price decline, forward curves continue to signal underlying tightness. Brent’s prompt spread—the price gap between the nearest two contracts—rose to $1.21 per barrel in backwardation, up from $0.69 a month ago. Although this remains below the levels seen during last month’s Israel-Iran conflict, the structure still suggests strong prompt demand relative to future deliveries.

Backwardation in oil markets typically reflects supply constraints or heightened immediate demand, indicating that while macroeconomic risks linger, physical market dynamics remain firm.

Oil’s recent price action reflects the market’s balancing act between easing trade tensions and looming supply increases. While new U.S. trade deals have helped stabilize demand expectations, the potential for OPEC+ to flood the market with more barrels poses a fresh challenge for bulls.

With the U.S. holiday limiting trading volumes and OPEC+ poised to announce new production targets, investors are treading carefully. The outcome of the weekend’s meeting will likely define the direction of crude markets into the second half of July, as traders weigh geopolitical developments against the fundamentals of supply and demand.