Morning Commentary: Jobs Jobs Jobs

Foreign Exchange - Morning Commentary
Jobs Jobs Jobs
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Andrew Kositkun
Andrew Kositkun
Foreign Exchange Head Trader
Earlier in the week, the ADP jobs report delivered a surprise when it showed the economy losing significantly less jobs than expected.  This led some in the markets to hope that a similar trend would reflect in the government’s jobs report, although others were still skeptical given the difference in how the two jobs reports are complied.  

However, even the most optimistic market observer likely did not expect today’s non-farm payroll report to show that the economy added 2.5 million jobs against expectations for a loss of 7.5 million jobs.  The jobless rate also fell from 14.7% to 13.3%.  North of the border, a similar dynamic was also at play with the Canadian economy adding 289.6 thousand jobs against expectations for a loss of 50 thousand jobs.  The unemployment rate in Canada also fell from 15.0% to 13.7%.  

While all the usual disclaimers apply—economies are coming off a low base after losing tens of millions of jobs and there still remains high uncertainty around the ability to recover—these reports are clearly positive and bodes well for the shape and speed of the recovery.  
  • US-China relations are also helping the market’s risk on sentiment.   US Trade Representative Robert Lighthizer said he feels “very good” about the Phase One trade deal.  While recent rhetoric around US-China relations have been elevated lately, most of the actions have been around less material issues.  The viability of the Phase One deal was seen as a key gauge of the state of US-China relations. 
  • The latest round of Brexit talks have ended with little progress as the initial optimism at the start of the week fizzled out.  The impetus is now on the UK to request an extension before the July 1 deadline although the UK government remains steadfastly against this.  Despite this, market action appears to be pricing in an extension as the GBP finds itself up on the month.    
  • Crude prices continue to rally with the most recent leg higher coming on the back of reports that OPEC+ is set to extend its output cut agreement after overcoming resistance from Iraq.  
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