Dollar Gains Fizzle After Jobs-Driven Boost as Wages Disappoint

  • U.S. payrolls, participation and unemployment rates all gain
  • Loonie climbs to 10-month high after robust Canada jobs report

The dollar steadied with slight gains overall after the June U.S. employment report delivered a little something for everyone, with robust jobs growth for dollar bulls, while bears focused on the subdued increase in wages.

The greenback was mixed against its G-10 peers. Choppy trading in the aftermath of the jobs data saw dollar-yen rise to near a two-month high and the euro advance to its highest since late June. The dollar was on track for a weekly gain of 0.4 percent, its biggest weekly rise since May, though only its second weekly gain in the last six. Meanwhile, the loonie climbed to a 10-month high after Canadian jobs numbers beat expectations, cementing the idea that the Bank of Canada will raise rates at next week’s meeting.

  • The June employment report showed non-farm payrolls rose by 222k vs estimates for a gain of 178k. The unemployment rate rose a tenth of a percent point to 4.4% as the participation rate rose to 62.8%, signaling more people are looking for jobs. Average hourly earnings rose 0.2% m/m, missing estimates for a gain of 0.3%
  • The Canadian dollar rose to its highest vs the USD since September after the Canadian economy added 45.3k jobs in June, beating estimates for a gain of 10k. Traders are betting that the BOC may raise rates by 25 bps when it meets next week. The Mexican peso led emerging-market gains against the USD, strengthening ~1% against the greenback to erase its weekly loss
  • Complicating trading, a global bond sell-off continued, albeit at a slower pace Friday than earlier in the week. The yield on the 10-year Treasury rose to its highest since May 11, while the yield on the comparable 10-year bund was little changed, restoring some advantage to the dollar
  • The JPY fell to the lowest since May 11 after the Bank of Japan took steps to fend off contagion from the global bond slide by offering to purchase unlimited bonds at a fixed-rate auction. Though it found no takers, the offer signaled the bank’s resolve to anchor the JGB yield curve. Meanwhile, the pound fell to its lowest since June 28 at 1.2867 after weak industrial production data
  • EUR/USD was nursing slight losses in late trading after earlier rising to a new high for the day at 1.1440, stalling just ahead of the late June peak at 1.1445 that offers technical resistance. Stop-loss buy orders and stop-entries are positioned above 1.1450, according to traders familiar with the transactions who asked not to be identified because they are not authorized to speak publicly. Conversely, stop-loss sell orders are in place under the session low of 1.1380 should the EUR extend its modest decline
  • USD/JPY rose to a high of 114.18 as UST yields climbed, breaching 114.00 for the first time since May 11, amid steady two-way flows as macro and real-money demand met Japanese domestic sales, according to traders in New York. USD/JPY faces technical resistance at 114.37, the high on both May 10 and May 11, with a breach opening the way for gains toward the March 10 peak at 115.51
  • The Fed’s Monetary Policy Report stuck mostly to technical considerations concerning the bond market and had little impact on currencies; attention turns to Fed Chair Yellen’s semi-annual testimony to Congress next week
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