USA: Non-farm Payrolls (NFP) Adding 372K, Wages Up. CPI Is Released On July 13th

Canadian Dollar Falters as USD/CAD Tests Key Support Amidst Rising Oil Prices and Economic Data
  • The US economy has gained 372K jobs in the previous month, showing that hiring remains robust.
  • Wages have risen by 5.1%, pointing to ongoing inflation pressures.
  • The chances of a 75 bps rate hike in July have increased, supporting the dollar.

Good news is bad news – for stocks, but not the dollar, and more may be in store. The US has reported another impressive month of job growth, 372,000 in June, on top of only a minor downward revision of 6,000 for May. Expectations stood at around 270,000 and the "whisper number" was 243,000. Job growth is strong.

The US might have contracted in the first half of 2022 – a recession – but it is far from feeling that way for American workers.

The unemployment rate remained at 3.6% as expected, but the U-6 "real unemployment rate" – taking people too discouraged to look for a job into account – fell to 6.7%. That is another piece of good news.

What about wages? Salary increases are well-correlated with core inflation that the Fed is watching. Average earnings grew by 0.3% MoM as expected and 5.1% YoY, 0.1% above estimates. In any case, it substantially exceeds the Federal Reserve's 2% target.

The Fed is focused is on fighting inflation – and it is set to remain high according to this jobs report. That means a faster pace of increase is borrowing costs is needed, and perhaps also promises for doing more in the future. What doesn't work with a terminal rate of 3% may work with 3.5%.

For the US dollar, this is great news, implying more gains are in store. As usual, the best expression of the response to US data is in USD/JPY, but it is hard to see EUR/USD recovering from its fall toward parity.

The next big thing to watch is the Consumer Price Index (CPI) report due out on Wednesday, July 13. Fresh inflation data has become more important than Nonfarm Payrolls. A monthly increase of 0.6% is expected in Core CPI YoY, and any move up or down may make a significant difference.

Canadian Dollar Falters as USD/CAD Tests Key Support Amidst Rising Oil Prices and Economic Data

FXStreet News

FXStreet is the leading independent portal dedicated to the Foreign Exchange (Forex) market and was founded in 2000.
 
The website offers a wide range of tools and resources: 24/5 currency news, real-time economic calendar, advanced rates and charts, educational webinars, analysis reports, forecasts, Learning Center, newsletters, industry services, FX customizable studies...
 
As its distinctive trademark, the portal has always been proud of its unyielding compromise to provide neutral and unbiased information and to enable its users to take better and more confident decisions. FXStreet has managed to gain the collaboration of the entire Forex industry, from individual professionals and small companies right up to Forex Brokers and Investment Banks. FXStreet covers the FX Market 24/5: an expert team of journalists, traders and economists picture what the market is doing and what is happening as it happens.