The ranges of estimates are important in terms of market reaction because when the actual data deviates from the expectations, it creates a surprise effect. Another important input in market’s reaction is the distribution of forecasts.

In fact, although we can have a range of estimates, most forecasts might be clustered on the upper bound of the range, so even if the data comes out inside the range of estimates but on the lower bound of the range, it can still create a surprise effect.

Non-Farm Payrolls

• +25K to +200K range of estimates
• 80K-130K range most clustered
• +110K consensus

Unemployment Rate

• 4.4% (2%)
• 4.3% (88%) – consensus
• 4.2% (10%)

Average Hourly Earnings Y/Y

• 3.6% (3%)
• 3.5% (72%) – consensus
• 3.4% (22%)
• 3.3% (3%)

Average Hourly Earnings M/M

• 0.4% (2%)
• 0.3% (75%) – consensus
• 0.2% (23%)

Right now, the market is pricing in a 29% chance of a rate hike in July, which rises to 65% in September. I’m pretty sure we will need notable upside surprises in the data to force the Fed to hike already in July. September would be the preferred month for them as they also release the SEP and the dot plot.

Given the Fed’s focus on inflation, the US CPI will likely be more important for market pricing unless we get a blockbuster NFP report today. In line or worse than expected data, should lead to a pullback pretty much across the board. On the other hand, upside surprises should keep the Fed’s tightening risk alive and extend the consolidation until the US CPI release.

This article was written by Giuseppe Dellamotta at investinglive.com.