In the European session, only minor data releases are expected, including industrial production for Germany and France, and Eurozone retail sales. These figures are unlikely to influence current market pricing.

In the American session, there are key labour market reports. Canadian employment data is anticipated at -12.5 compared to 7.4K previously, with the unemployment rate increasing to 7.0% from 6.9%.

Bank Of Canada Outlook

The Bank of Canada recently maintained interest rates, waiting for more trade and inflation details. Currently, 31 basis points of easing are forecast by year-end, projecting the next cut in the final quarter of 2025.

The US non-farm payrolls report is expected to reveal 130K job additions in May compared to 177K in April, with the unemployment rate steady at 4.2%. Average Hourly Earnings Y/Y is expected at 3.7%, down from 3.8%, while the M/M figure is projected to rise to 0.3% from 0.2%.

Labour market data suggests a slowdown in hiring linked to tariff issues, though not enough to prompt Federal Reserve rate cuts. The market forecasts 54 basis points of easing by year-end, with the first cut anticipated in September. If data improves, the Fed may have less reason for rate cuts, affecting market expectations.

The figures expected from Germany, France, and the wider Eurozone—though potentially helpful for gauging trends in consumption and manufacturing activity—are not likely to shift positioning meaningfully. At least not in the immediate term. These are backward-looking indicators, and while they help polish the picture economists are building, they often come to traders too late to act upon directly. Markets have mostly moved on before these reports even hit the terminals.

North American Data Impact

Now, the real focus today hones in on the North American data prints, where the Canadian jobs report and the United States’ non-farm payrolls read have the potential to trigger sharper moves. Let’s unpack that.

The Canadian employment release, with expectations for a headline number in negative territory, reflects a cooling jobs market. A 12.5K contraction compared to last month’s modest gain would underscore slower hiring conditions. The rise in unemployment from 6.9% to 7.0% supports that view, and it ties into why The Bank of Canada held rates steady. Policymakers are looking for clarity—not just from employment but also from trade momentum and price data—before shifting course. As such, market-implied policy bets suggest just over one rate cut priced in by December, and not until well into next year.

Meanwhile, south of the border, the US labour market holds more weight for implied volatility pricing. While job gains are expected to slow—from 177K to 130K—the annual wage growth forecast remains decent at 3.7%, though this marks a minor dip. Monthly wages are expected to edge up, however. This mixed inflation signal, mildly easing year-on-year but firmer month-on-month, should soften premature calls for rate reductions by the Federal Reserve.

That brings us to positioning. The 54 basis points baked into the curve for this year—beginning with a September move—could be optimistic if the numbers hold steady or improve. Stronger employment or wages data increase the probability the Fed delays action. And if we see such surprises, traders exposed to directional rates or rate-sensitivity in credit spreads must reprice expectations quickly, as implied interest rate futures shift.

Powell and colleagues aren’t being forced into a corner yet. The hiring slowdown has been orderly, and—despite growing headwinds from tariffs—it hasn’t collapsed. Employment expansion continues, just more slowly. Until we cross a harder economic threshold, the Fed can afford to watch from the sidelines.

From where we sit, traders in interest rate derivatives, particularly STIRs and swap-linked exposures, must calibrate forward guidance risk. Front-end sensitivity will remain elevated through the next few employment cycles, especially if upcoming data contradicts the softer trajectory the market believes. Bias remains with steady yields in the short run, but duration bets tied to an aggressive easing curve may see pressure.

Volatility in the rates complex may not rise sharply today if NFP comes in near consensus, but unexpected shifts in hiring or wage inflation would provide clear signals, particularly for curve steepeners and short-dated rate products. Positioning must remain light enough to adapt, heavy enough to catch repricing if data pushes the Fed off their current trajectory.

Create your live VT Markets account and start trading now.