Jump In U.S. Jobs Gooses Yields And Lifts Dollar

Includes: FXB, FXE, FXY, TBT, TLT
by: Marc Chandler


Stronger than expected jobs report.

Participation rate unchanged, but unemployment fell to 6.1%.

Other detail in line with expectations.

The US grew 288k jobs in June, which is the most since January 2012. The participation rate was unchanged, but the unemployment rate fell to 6.1%. The other details of the monthly report were largely as expected with a 0.2% rise in average hourly earnings and an unchanged work week at 34.5 hours.

The household survey, which has lagged recently, showed 407k increase in jobs. Back month revisions increased by 29k jobs. The private sector added 262k jobs, The ADP estimate was for 281k.

Separately, the US trade deficit was slightly smaller than expected at $44.4 bln, helped by record exports. In real terms, when adjusted for inflation, the shortfall was $52 bln, in from $53.9 bln. That said, the real deficit is running ahead of Q1, suggesting that the external sector is a drag on growth. The Canadian trade balance in May showed a slighter smaller than expected deficit (-C$0.15 bln vs. consensus -C$0.30 bln, but the benefit was offset by a C$0.32 bln worsening of the April deficit (to -C$0.96 bln).

US Treasuries jumped but yields have failed to sustain a move above 2.67%. It was still sufficient, though to lift the dollar above JPY102. The euro and sterling have been knocked back by a little less than half a cent in the immediate reaction. Equities don't seem to know what to do--pushed higher by greater confidence in the economy or pulled down by higher rates.

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