US April non-farm payrolls +428K vs +391K expected
Canada April employment 15.3K vs. 55.0 K estimate
Fed’s Barkin wants to raise rates as ‚fast as feasible‘
Kashkari: The Fed must follow through on its forward guidance ‚at a minimum‘
Fed’s Kashkari: We have to do our best to achieve our dual mandate
ECB’s Elderson: Weaker incoming data don’t suggest so far that we’re entering recession
Baker Hughes oil rig count rises by 5 to 557 in the current week

Markets:
Gold up $7 to $1883WTI crude up $2.34 to $110.60US 10-year yields up 5 bps to 3.12%EUR leads, CAD lagsS&P 500 down 23 points to 4123 — first streak of 5 weekly losses since 2011
The non-farm payrolls report was right down the fairway. Jobs were a bit high but unemployment a tad disappointing. The main focus was on avg earnings and those were a fraction below consenus. That led to a brief dip in USD/JPY and short-dated yields but it didn’t last.
Instead, it was equities and deleveraging taking over once again. A swoon in stocks and bonds and several fledgling rallies lent some support to the dollar but the FX market was largely sidelined in this episode. Cable skidded along the bottom near 1.2340, as did the Australian dollar.
The loonie came under some selling pressure and USD/CAD rose above 1.2900 but couldn’t get above last week’s high of 1.2914 and there was some selling as risk trades made a bit of a stand late and oil — once again — found a bid.
In all those noise, the resilience in crude may be a true slgnal.  Oil closed the week above $110 to end a series of lower highs in what looks like a break from the wedge. That it could make the move in such a dicey market adds credence to the break. Natural gas though reversed on Friday to $8 after touching $9.
In Europe, the EU continues to debate a ban on Russian oil but Hungary might block it; there’s talk of giving them an 18-month timeline. Slovakia is also looking for an exception. There isn’t much chatter on the Iran nuclear front.
In USD/JPY, the pair added 42 pips on the day but it was all in Asia and we stayed within the range in New York trade. However it was the ninth week in a row of gains for the pair in what’s been an absolute screamer of a trend trade.

Have a great weekend.

Week ago today, the month of April ended with the NASDAQ index down over 13%. The market rallied on Monday, Tuesday, and Wednesday getting the month of May off to a good start. However yesterday’s sharp declines, and follow through selling today push the major indices lower on week. In other words the markets snatched defeat from the jaws of victory.
A look at the final numbers shows:

Dow industrial average -98.6 points or -0.3% at 32899.38. The index close at 32977 last Friday. The index fell -0.23% this week.
S&P index -23.51 points or -0.57% at 4123.35. The index closed at 4131.92 last Friday. The index fell This week -0.21% this week
NASDAQ index -173.02 points of -1.4% at 12144.67. The NASDAQ closed at 12334.64. The index fell -1.54% this week.
Russell 2000 fell -31.58 points -1.69% at 1839.56. It settle that 1864.10 last Friday. The index fell 1.37% this week.

This was the first stretch of five weekly declines in the S&P 500 since May-June 2011 and the first five-week losing streak in the Nasdaq since 2012.
Next week CPI data takes center stage. More Fed speak as well.

The US 10 year yield is approaching 2018 peak The US 10 year yield is trading just off the high for the day and week at 3.134%. The current yield is at 3.126%. Looking at the weekly chart, the yield is at the highest level since November 2018. The high yield in 2018 reached 3.248%. That is the next upside target. Move above that yield and the yield is at the highest level since April 2011. A little history of the rates vs the Fed funds rate: The Fed Funds target rate in 2018 peaked at 2.25% to 2.5%. The current target rate is 0.75% to 1.0%. Clearly the market is pricing in additional fed hikes. The last fed hike back in 2018 was in December 2018 when they increased the target rate to 2.25% to 2.5% from 2.00% to 2.25%. the 10 year rate was around 2.9% in December 2018 as the market started to think in terms of „that is it“. The Fed cut rates in July 2019 and stepped down to 1.5% in November 2019. The 10 year yield was around 2% in November 2019 In reaction to Covid, they slashed rates 0.0% to 0.25% in March 2020 where it stayed until March 2022. The 10 year yield bottomed in March 2020 at 0.333% right as the Fed cut to the lows. The Fed hiked by 0.25% basis points to 0.25% to 0.5% in March 2022. The 10 year yield was at 2.15%. They hiked 50 basis points last week to 0.75% to 1.00%. In 2022, the rate low was at 1.529% in early January. The current yield is up 1.59% from that low. What we know is the 10 year yield peaked a month before the last rate hike and bottomed the month of the last Fed funds rate cut. The current fed rate is not at the high. The Fed is still 100 to 150 pips from what is a neutral rate at 2.0% to 2.5% (where rates peaked). Hence the desire to get there as fast as possible. The Fed is behind the curve and behind the market. The market is leading.   Does the current 10 year yield just 12 basis points from the December 2018 peak means the market is near the neutral rate ceiling? Yes it seems that way IF the terminal rate is at 2.5%. However, if the terminal rate is going to be higher, there is room to roam to the upside at least given the price action from the last time the rates were near this area as compared to the Fed Funds target.

Richmond Fed President Thomas Barkin told MNI he wants to raise rates as ‚fast as feasible.‘ He doesn’t rule out a 75 basis point rate hike, but says current pace already accelerated. „Anything would be on the table,“ he said.Read it here.Comments from Bostic are due imminently.

There is still some time to save the day but the weekly chart on the S&P 500 isn’t a pretty picture.

The last time the market fell six weeks in a row was in 2011.

Inflation is becoming broad-basedCannot say that monetary policy cannot curb inflation pressuresThat’s Holzmann, Nagel, Kazaks, Knot, Villeroy and now Vasle to have been the more vocal parties in calling for quicker rate hikes. But perhaps the bigger shift has been the one by Rehn here. He is perceived as a bit of a dove so to be siding with the hawks, that perhaps signals a shift in thinking within the governing council.The mood music has certainly benefited the euro so far today, with EUR/USD up 0.4% to 1.0580 currently.

Does not see recession but a much weaker growth rateOptimistic about a monetary policy move this yearDoes not buy the argument that monetary policy should hold back just because of the economyThe remarks here are to be expected by Nagel, considering he is among the hawks. But they certainly have been a vocal bunch lately and it is helping to tip the scales in terms of market expectations at least. Money market odds are pointing to three 0.25% rate hikes from the ECB by October.

First, the BOE showed hesitancy. Then, they certainly look to be bottling the tightening cycle as they paint a rather bleak picture of the UK economy. But this playbook may not be something on its own at the end of the day.As inflation continues to run rampant or is at least looking to be more persistent, it could very well be the case for the US economy when we get to Q3 or Q4 this year. The question then becomes, what will the Fed do next?With surging inflation pressures and a slowing economy, the BOE is struggling to strike a balance on combating the former without making the latter situation worse with tighter policy.Even BOE chief economist, Huw Pill, earlier confessed to that sentiment:“It is a tricky balance to control inflation without slowing growth more than necessary. And the arguments around where rates should be set in order to achieve that balance are quite finely balanced in themselves.“If that doesn’t sound like a policymaker who is losing belief in the tightening cycle, then I don’t know what is.As such, the major worry for the Fed is that it might be going down the same path as the BOE but just a few steps behind. In judging that, economic data is going to be key. Any higher inflation readings and weaker economic activity will start to ignite stagflation risks and that could very well bring about fears at the Fed that it would turn into the next BOE.Only time will tell how all of this plays out but it certainly is a case scenario that shouldn’t be ruled out.

The push and pull continues as EUR/USD has rebounded by nearly 100 pips now from a low of 1.0483 to a session high of 1.0580. This comes as the dollar is seen giving up gains across the board after a fresh rally earlier in the day. Of note, EUR/USD is now trading back above both its key hourly moving averages again: Meanwhile, GBP/USD is also up from a low of 1.2275 to 1.2350 currently, down just 0.1% on the day. Elsewhere, AUD/USD has also moved up from 0.7065 to 0.7105 and is also down just 0.1% while NZD/USD is flat at 0.6425 from a low of 0.6396 earlier. The move lower in the dollar comes as US futures also see a bounce with S&P 500 futures moving off a low of 4,112.75 (down 0.7%) to 4,139.25 (down 0.1%) currently. It’s the flow show at the moment and I would expect that to be the case until we get to the weekend break.

Headlines:Sterling tumbles as BOE paints dire outlook on UK economyBOE raises bank rate by 25 bps from 0.75% to 1.00%, as expectedBOE’s Bailey: Risks to inflation are skewed to the upsideOPEC+ reportedly agrees to stick with existing oil output policyOPEC+ JMMC reportedly recommends sticking to existing oil output policyECB’s Lane: Unlikely to revert back to pre-pandemic inflation trendECB’s Lane: Exact timing of rate hike is not the most important issueECB’s Panetta: It would be incautious to act on rates before seeing Q2 dataUK April final services PMI 58.9 vs 58.3 prelimGermany March factory orders -4.7% vs -1.1% m/m expectedUS April Challenger layoffs 24.29k vs 21.39k priorSwitzerland April CPI +2.5% vs +2.5% y/y expectedMarkets:USD leads, GBP lags on the dayEuropean equities higher; S&P 500 futures down 0.6%US 10-year yields up 2.9 bps to 2.944%Gold up 0.9% to $1,897.50WTI up 0.8% to $107.10bitcoin down 0.9% to $39,461The post-FOMC moves yesterday are retracing back slightly as the dollar firmed, bond yields crept higher and US futures are marked lower in European morning trade. But the pound is the big mover as it crumbled amid a dovish rate hike by the BOE, with the central bank painting a rather bleak picture of the UK economy moving forward.Stagflation risks are what stands out as policymakers predict 10% inflation this year with the economy contracting at the end of the year and grinding to a halt in the early stages of next year.That is enough to drag the pound to fresh lows since July 2020 as cable tumbled from 1.2540 to below 1.2400 currently.Meanwhile, there is still some debate to the peak hawkishness message from the Fed yesterday as markets scaled back on the post-FOMC moves. EUR/USD moved down from 1.0600 to 1.0550 while USD/JPY jumped up from 129.30 to near 130.00 again currently.AUD/USD also gave up gains from around 0.7240 in a fall to 0.7190 at the moment.This comes as bond yields are staying higher with 10-year Treasury yields still lingering just below the key 3% mark.Elsewhere, stocks are also looking more guarded with US futures holding lower once again as yesterday’s late spark may yet prove to be fleeting.