Macro Week Ahead: Can Market Cheer Hold Up as Traders Clash with the Fed?

Traders cheered US jobs data, despite mixed results. Will the cheery mood hold up as the Fed and markets clash?

• Markets cheered US labor market data despite mixed cues questioning jobs growth
• June FOMC meeting minutes eyed as bond markets and Fed officials clash on rates
• China inflation and trade figures set to show the economy continues to look anemic

Stock markets continued to push higher last week. Despite a slowdown in momentum from the prior week, the bellwether S&P 500 and the tech-minded Nasdaq 100 both set new record highs. Most of the rally came on Thursday, the last day of trade before Friday’s holiday closure, as US jobs data appeared to top analysts’ forecasts.

June’s report from the Bureau of Labor Statistics (BLS) showed the economy added 147,000 jobs last month, beating expectations calling for 110,000. May’s result was also revised narrowly higher to a rise of 144,000, from the initially reported 139,000. The jobless rate unexpectedly ticked down to 4.1%.

The headline data seems to be less than meets the eye. The two-month revision finalizing the results for April and May brought a cumulative downgrade of 95,000 jobs. Meanwhile, the lower unemployment rate appeared to be explained by a decline labor force participation rather than a pickup in demand.

Nevertheless, traders seemed to take the numbers at face value. Treasury bonds fell as yields and the US dollar rose after the report’s release, suggesting that traders took the figures as likely to diminish scope for Fed interest rate cuts this year. That stocks rallied in tandem suggests markets extracted a positive growth signal from the data.

Against this backdrop, here are the key macro waypoints to consider in the days ahead.

Federal Open Market Committee (FOMC) meeting minutes

Despite the response to last week’s US economic data, the markets continue to nurse a more dovish perspective on monetary policy than that of the Federal Reserve. In June, the central bank’s rate-setting FOMC committee projected 75 basis points (bps) in cuts through year-end 2026. Fed Funds futures now price in 111bps.

This week, minutes from last month’s FOMC meeting will help illustrate where the US central bank is coming from. A familiar narrative seems likely: neither inflation nor employment seem to be screaming for immediate attention, leaving policymakers with room to wait until the impact of tariff-related influences becomes clearer.

China inflation and trade data

Meanwhile, this week’s data offering from China looks likely to produce evidence of ongoing malaise in the world’s second-largest economy. Consumer price index (CPI) figures are expected to put headline inflation at 0.0% year-on-year. Trade numbers due over the weekend will offer a view on how tariff front-running stacks up against domestic demand.

China’s economy has been stuck in a deflationary trap for eight consecutive quarters. That makes it unable to offset any would-be economic downturn in the US, especially while the Eurozone growth remains near standstill. The three economies account for a hefty 58% of global output, but weakness outside the US makes for a single point of failure.

Ilya Spivak, tastylive head of global macro, has 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts #Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak

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