The US economy continues to show resilience despite ongoing uncertainties, particularly around tariffs. While some sentiment indicators suggest businesses and consumers are becoming cautious, the fundamental economic data remains robust. FX analyst Antje Praefcke notes that the labor market, in particular, continues to exhibit strength.
We will probably have to accept that the fundamentals in the US will remain relatively strong for some time, especially the labor market, as tomorrow’s June labor market report is likely to confirm,” said Praefcke. The ADP employment report, which showed the creation of only 37,000 private sector jobs, has raised some concerns. However, Praefcke advises against overreacting to this figure, pointing out that the ADP index has frequently underestimated the official data in past months.
One explanation for the current economic resilience is the temporary suspension of most tariffs.
Economic resilience in uncertain times
Markets are not likely to feel the full impact until these tariffs are implemented, which is expected to occur in mid-July.
If the suspension is extended, the impact could be delayed further. The divergence between interest rate and currency markets is also notable. While the interest rate market is reacting more to inflation concerns influenced by tariffs, the FX market remains focused on the still-decent growth figures.
Both markets are being equally affected by the tarnished status of the USD and US government bonds as safe havens. In summary, while there are signs of caution and uncertainty, particularly in sentiment indicators, the core economic data for the US remains strong, especially in the labor market. As such, the economy is expected to remain stable for the near future, barring any significant changes in tariff implementation or other economic policies.
