The US jobs report added 372,000 new jobs in June. This was higher than the 268K estimate. Granted, there has been a -74K revision in the last two months (with May revised to 384K from 390K). Nonetheless, if the current month has been adjusted for this number, a net addition of 298K (372K – 74K revision) still beats the consensus estimate.
Looking at the other measures in the report, the unemployment rate remained stable at 3.6%. The average hourly wage increased by 0.3% as expected and by 5.1% against an estimate of 5.0%. The turnout fell to 62.2% from an estimated 62.3%. The U6 underemployment rate stood at 6.7% against an estimated 7.1%.
Overall, the jobs report – barring a huge surprise in the CPI next week which is expected to show a gain of 1.1% m/m and 0.6% for the core – should cause the Fed to hike another 75 basis points when its interest rate decision is made. announced July 27. That would bring the target range to 2.25% to 2.5%, what Fed officials called the neutral rate. The trajectory of rate hikes is expected to continue through the end of the year. Fed central trends saw the year-end rate at 3.4%, implying a year-end target rate of 3.25% to 3.5%. It just seems right.
The questions at this point are “What comes after that?”
- Can the Fed execute the soft landing?
- What happens to other rates like mortgage rates and the housing market?
- Is the Fed really avoiding a recession?
- If not, is the Fed going back to neutral?
- How is the stock market reacting?
- Has the market gone too far with the downtrend
This week, the major equity indices rose, with the Nasdaq outperforming with a 4.5% gain. The ARK Innovation fund rose by 13.68%. Granted, it’s down -70.66% from its highest level, but is there roaming from lower levels. 10% off the current price of $46.86 is $4.68. Reaching $51 or $52 is not a difficult hurdle given that the 2021 high was up at $159.70 and the price traded at that level on April 25th – there is not so long time.
In the FX market today, the USD was mixed with gains against the JPY and CHF and declines against the EUR, CAD, AUD and NZD. The greenback was little changed against the GBP. Price action in forex has seen volatility rise and fall. The dollar rose after the jobs report, but then started to give up those gains at the close in London. After traders exited London, there was a slight move back up, but overall the day’s changes were relatively modest with a 0.33% gain against the CHF and a down -0.24 against the EUR, the biggest movers.
Overall, the EUR was the strongest of the majors and the CHF was the weakest. The EURCHF was the biggest move in the currency pair with a gain of 0.57% on the day. Relatively speaking, the changes have been modest as traders reflect on what may have already factored in.
Still, it’s hard to see a sharp decline in the dollar going forward given the green light given to the Fed to raise rates on both jobs gains and inflation, while Japan and the EU are still struggling with the idea of a tightening, and the UK also has to deal with political, inflation and European problems.
Next week, the Bank of Canada and the Reserve Bank of New Zealand are expected to raise rates a further 50 basis points respectively (both announced on Wednesday).
In Canada today, their jobs report was weaker than expected with a decline of -43.2K jobs against expectations of +23.5K (mostly in part-time jobs at -39.1K and in the service sector). services). However, the unemployment rate hit a new high at 4.9% from an estimated 5.1%, as the participation rate fell to 64.9% from 65.3% as workers left the labor market.
In other markets today:
- Spot gold was up $1.98 or 0.11% at $1742.10. Last Friday the price closed at $1810
- Spot Silver rose $0.10 or 0.55% to $1931. Last Friday the price closed at $19.87
- Crude Oil is at $104.78 up $2.08 on the day. Last week’s close was at $108.42
- Bitcoin is trading at $21,864. The price a week ago today was $19239
In the US debt market today, yields have risen sharply as it looks like 75 basis points are now baked in the cake
- 2-year yield 3.105%, up 9.7 basis points on the day. Yield last Friday closed the week at 2.839% for a weekly gain of more than 26 basis points
- 5-year yield 3.127% up 9.0 basis points on the day. A week ago, the yield was 2.884% for a gain of about 25 basis points for the week.
- 10-year yield 3.082% up 8.2 basis points over the day. A week ago, the yield was 2.889% for a gain of 19 basis points for the week.
- 30-year yield 3.252%, up 6.3 basis points on the day. A week ago, the yield was 3.116% for a gain of about 14 basis points for the week.
Sad notes this week included the killing of seven people in Highland Park, Illinois during a July 4 celebration parade, including the mother and father of a 2-year-old child, and the murder of former Japanese Prime Minister Shinzo Abe as he addressed a crowd. at an election campaign rally in Nara, Japan. In the United States, gun violence is as common as the sunrise, but in Japan, it is rare.
It is easy to become callous and complacent in the face of violence. However, at the end of every bullet point there are people with incomplete stories and lives, children and families and sometimes even nations who are denied what they could have done tomorrow, next week, l next year and beyond. It is a tragedy that should not happen.
Hopefully the pendulum starts swinging the other way, at some point and that time is soon to come. In the meantime, say a prayer for peace and for all the victims who were at the end of a path of bullet destruction.