Morning Commentary: U.S. Jobs Report – Is it a Game Changer?

Foreign Exchange - Morning Commentary
U.S. Jobs Report – Is it a Game Changer?
Share this story:
Alan Rose
Alan Rose
Foreign Exchange Senior Trader
A belated Happy Fourth of July to all our loyal readers and to the 243rd Anniversary of the founding of our country!
Today’s U.S. June jobs report has temporarily upended market psychology and positioning as investors were jolted to a much stronger-than-expected U.S. June jobs report. For the past weeks and months, markets have been increasingly pessimistic about the future state of the U.S. economic expansion and have aggressively priced in the need for the Fed to act aggressively to cut interest rates over the next nine months.
U.S. 10-year yields have fallen a dramatic 65 bp since April as a combination of weaker U.S. economic data and the Fed continuing to pivot dovishly has caused yields to plummet. Today’s jobs report came in much stronger than consensus and will have many investors rethinking the need for immediate and aggressive Fed action over the next months.
The June jobs report produced an eye-popping 224,000 jobs against consensus estimates of 160,000. The UR ticked up from 3.6% to 3.7%, but that was offset by the labor participation rate rising from 62.8% to 62.9%. Average hourly earnings rose just 0.2%, keeping the YoY rate at 3.1%. U.S. interest rates across the curve have shot up sharply with 2-year yields up an enormous ~11 bps to ~1.87% and 10-year yields up by ~10 bps to ~2.05%.
The U.S dollar (DXY) is much stronger across the board against both the majors and emerging market currencies as U.S. interest rate differentials have far outpaced the gains of other countries. Commodity prices and gold are much weaker, and European and U.S. equities have all turned to red. One month’s number might not be a game-changer yet, but it will certainly give pause to those that were looking for continued economic weakness as the U.S. job-creating machine marches on.
  • Canada’s June jobs report was mildly disappointing shedding 2,200 jobs against expectations of a gain of nearly 10,000. But today’s job report should be seen against a backdrop of amazing job creation since the beginning of the year where 247,500 jobs were created. The UR ticked higher from 5.4% to 5.5%, and the participation rate remained unchanged at 65.7%. Wage inflation shocked many economists as it rose sharply from 2.6% to 3.6%. Canadian interest rates have mirrored the rise in U.S. interest rates today, but the Canadian dollar is weaker succumbing to U.S. dollar strength.
If we can help you with any Foreign Exchange needs, please email or call (800) 447‑4133.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Facebook Twitter LinkedIn Google Plus YouTube
Non-deposit investment products:
Are not FDIC insured,
Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and
Are subject to investment risks, including possible loss of the principal invested.
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. City National Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Unsubscribe from this list  |  Update email preferences
This message has been sent to Please do not reply to this email. To ensure the delivery of future emails, please add to your email address book or safe sender list.
Copyright ©2019 City National Bank – All Rights Reserved.
350 South Grand Avenue, 12th Floor, Los Angeles, CA 90071
City National Bank is a subsidiary of Royal Bank of Canada.
Equal Housing Lender
NMLSR ID# 536994 | City National Bank Member FDIC


Popular posts from this blog

Acquisitions or Alliances: What's Your Growth Strategy?