There has been a lot of political noise on both sides of the Atlantic and more is still in store for coming days. This has led markets to incorporate the fiscal outlooks into their more near-term thinking again with US Treasuries having led a resteepening of yield curves over the past few days. Lately of course that dynamic was accentuated by Bunds unwinding some of their France-related safe-haven bid.

While an important factor, we think that the US data should refocus markets on the potential monetary policy shifts ahead. And we think it holds growing prospects of a front-end led steepening of curves. Clearly, markets remain sensitive to the data, as yesterday’s jobs openings underscored. The upside surprise nudged yields briefly higher, but single readings are probably more noise than signal.

Overall, the trend is still pointing to a cooling jobs market. This is what we hope to see more evidence of with this Friday’s nonfarm payrolls as we step towards a September rate cut. Today we will sift through the ADP payrolls report, job cuts data, initial and continuous jobless claims as well as the ISM services index and its employment component.

Markets took away little from remarks by Federal Reserve Chair Jay Powell and European Central Bank President Christine Lagarde at Sintra. On the face of it, central banks are still more inclined to further reduce the restrictiveness of their policies. Tonight, markets will parse the minutes of the June FOMC meeting where the Fed presented an updated dot plot projecting only one cut this year from three a quarter before. The minutes could reveal some narrative surrounding the risks of that outlook and how high the bar is for the Fed to still follow up with more cuts.