Analysts at TD Securities, (TDS), explained that the June employment report was mixed but not as bad as the knee-jerk market reaction might suggest, with another solid payroll print, a higher unemployment rate as workers flooded back into the labor force, and modest wage growth that held steady at 2.7%.
Key Quotes:
“Nothing in the report should change the Fed’s policy outlook: the June FOMC minutes highlighted an expectation that the labor market may be able to tighten further via higher participation as wage growth slowly improves, allowing the Fed to remain on a continued, gradual pace of rate hikes.”
“Rates: Treasuries reacting to weaker wage and unemployment rate prints, but flattening momentum should begin to reassert itself following the knee-jerk steeper.”
“FX: We think markets may take this opportunity to dial back on USD longs. We don’t think this month’s reading provides a strong directional impulse for FX markets, however, as investors wrestle with bigger-picture issues. We look for some limited upside in EUR, AUD, and NZD near-term as investors may dial back on risk allocations ahead of the summer lull.”
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