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Analysts at Westpac explained that the US dollar found support on even stronger than expected Oct US jobs data but sentiment otherwise cooled a little on reports that played down hopes of a US-China trade deal any time soon.

Key Quotes:

“AUD/USD’s rally was wiped out as it returned to 0.7190. There is plenty on the global calendar this week but today is low key. The Oct US non-manufacturing survey is the main data release.

Currencies and macro themes

The US recorded robust job gains in October, non-farm payrolls rising by 250k against expectations for a 200k increase. Other detail was generally in line with expectations, depicting a labour market that is on a firm footing and an economy coasting at an above trend growth pace: the unemployment rate held steady at close to fifty year lows of 3.7%, while average hourly earnings rose 0.2%, lifting the annual rate to a headline-grabbing 3.1% from 2.9%, a nine-year high.

The US trade deficit continues to widen, paced by strong import growth, the deficit hitting a seven month high of -$54bn in Sep. The deficit with China was -$37bn.

EUR/USD traded a fairly wide 1.1372 – 1.1456 range but starts the week net little changed from early Friday, around 1.1400. USD/JPY rose from 112.70 to 113.20/30, finding support on the US jobs data and higher yields.

White House economic advisor Larry Kudlow told his former employer CNBC that, contrary to the earlier Bloomberg story, President Trump had not asked his Cabinet to draft a trade deal with China, “We’re not on the cusp of a deal.” Equities weakened in response and it was another weight on AUD/USD after it had bounced half a cent to 0.7250 in the Sydney afternoon on the Bloomberg headlines. The Aussie starts the week just under 0.7200.

NZD/USD also bounced on the optimistic Bloomberg story, to 0.6690 – a one-month high – before falling to 0.6640. AUD/NZD ranged between 1.0810 and 1.0860. USD/CNH fell as far as 6.8525 in the London morning but then bounced to 6.9000, versus 6.9260 pre-US-China “deal” headlines.

GBP/USD gapped up from 1.2966 over the weekend to 1.3025 on the Monday Sydney open and extended to above 1.3060 on Brexit optimism. The Sunday Times claimed that UK PM May had received concessions from Europe that would keep all of Britain in the EU customs union, though May’s office deemed this to be “speculation.”

Canadian employment rose 11k in Oct, near consensus after the 63k jump in Sep. A lower participation rate helped nudge the unemployment rate down from 5.9% to 5.8%. USD/CAD bounced from 1.3065 to 1.3110 as the US and Canadian data was released.”