As we cautioned last week, the release of the US non-farm payroll figures often has the ability to move markets and last Friday’s data did just that.

Rather than adding 175,000 jobs as the market expected, the US economy expanded fast enough in May to grow payrolls by 272,000, more than even the most bullish forecast, and average hourly earnings growth was also hotter than predicted.

Once again, the increase was led by private health and education, leisure and hospitality and government roles, and while there may be questions over how the figure is calculated the market immediately marked Treasuries and stocks lower as expectations for US rate cuts were pushed out yet further.

Rather than three cuts this year and three next year, some economists are now betting on two or even just one cut this year with cumulative easing of 40 basis points or 0.4% by December.

All of which means the focus this week will be more on what the Federal Reserve says rather than what it does, in particular its commentary around core inflation, the labour market and consumer spending, which despite the signs of weakness in April remains the main engine of the US economy.

Like the ECB (European Central Bank), which last week cut interest rates claiming it had made ‘major progress’ in the fight against inflation, the Fed isn’t just trying to combat high prices but also the expectation high prices will become permanently embedded in the economy.

This will likely remain the theme for the remainder of this week and next week, with UK and US one-year inflation expectations published on Friday, UK and Chinese house prices released on Monday and UK and European core consumer prices due later in the week.

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