Dollar higher across the board
The Fed's job just got tougher.
This is the final US jobs report before the July 31 Federal Reserve rate decision and it will make the Fed's task much more difficult.
The US added a robust 224K jobs in the month after creating just 72K in May. The market had been pricing in a 27% chance of a 50 basis point cut prior to the data. It fell to just 11% afterwards.
It's puzzling that it remains above zero and that the market remains extremely confident about a cycle of cuts coming. The jobs number was accompanied by a one-tick rise in the unemployment rate to 3.7% from 3.6% but that was coupled with rising participation so it's arguably moot and is still near generational lows.
The US dollar has jumped after the report, climbing 30-60 pips across the board. US 10-year yields are up 5.5 bps to 2.01%.
The economic bears will argue that employment is a lagging indicator and that's true. At the same time, there are few indicators anywhere that would argue for cutting rates aggressively now.
The Fed has repeatedly pointed to trade uncertainty but that file has improved since the G20.
With the dollar move, cable is approaching the June low of 1.2506. Watch for stops on a break.
