Market wrap: dollar and rates get a boost from solid nonfarm payrolls - Westpac

Analysts at Westpac noted that a solid US jobs report gave the US dollar and US interest rates a significant boost.

Key Quotes:

"AUD and NZD accordingly fell, but not as much as the other majors."

Global market sentiment: A solid US jobs report gave the US dollar and US interest rates a significant boost. AUD and NZD accordingly fell, but not as much as the other majors.

Interest rates: US 10yr treasury yields jumped from 2.23% to 2.29% after the jobs data and closed at 2.26%. 2yr yields jumped from 1.34% to 1.37%. Fed fund futures yields didn’t shift much, pricing the chance of a December rate hike at around 45%.

Currencies: The US dollar index closed up 0.8% on Friday. EUR underperformed, falling from 1.1880 to 1.1732 post US jobs and closing at 1.1773. USD/JPY jumped from 110.00 to 111.04. AUD fell from 0.7974 to 0.7891 post US jobs, closing at 0.7922. NZD fell from 0.7455 to 0.7394, closing at 0.7409. AUD/NZD ranged sideways between 1.0670 and 1.0780.

Economic Wrap

US: Non-farm payrolls rose 209k in July, stronger than expected. That’s a second consecutive read above recent trend (3mth avg: +195k, 12m avg: +180k). Gains were widespread across sectors, the separate household survey matching the establishment survey, showing a strong +345k gain. Average hourly earnings rose a crowd pleasing 0.3% (2.5% ann), and the labour force grew a decent +349k, boosting the participation rate and unemployment fell 0.1ppts to 4.3%. There’s much to be impressed about with this jobs report and the Fed will breathe a sigh of relief on the earnings front.

Event Risk

NZ: RBNZ inflation expectations for Q3 may moderate slightly in line with the recent pullback in actual inflation. Expectations jumped from around 1.6% to 2.2% over Q1 and Q2.

Australia: It is a bank holiday in NSW but we still get ANZ job ads which last came in at 2.7%.

Euro Area: Aug Sentix investor confidence is out with the index maintaining a jump in optimism from the start of the year.

US: Jun consumer credit is expected to ease slightly to 16.0bn from 18.4bn. Auto and student loans have continued to support credit growth through 2017 but auto delinquencies have ticked up. Fedspeak includes Bullard speaking on the economy and policy and Kashkari participates in a Q&A."