A$ Sees Limited Selling Post Jobs Data

AUD/USD dipped initially following the weaker than expected jobs report but follow through selling has been limited. We got close to 0.6925 before recovering ground. The pair last tracked 0.6930/35. So only modestly below NY closing levels.

• The headline jobs loss was a steep one, (-40.9k) and the largest downside surprise relative to expectations since October last year. Moreover, all of the job losses were in the full-time segment (-86.9k).
• Still, the ABS placed caveats on today's release, noting the July reference period coincided with the winter school holiday period, worker absences during to Covid and other illnesses and further flooding in NSW.
• On this basis it might be premature to regard today's result as the start of fresh trend weakness in the labor market. In any event, the unemployment rate still nudged down to 3.4% a fresh cyclical low, so it's difficult to argue the labor market is anything but very tight at the moment.
• In the yield space, we continue to see front end weakness today. The 2yr us back to 2.775%, versus earlier highs above 2.82%. Note though that US 2yr yields are also lower (-2.5bps for the session). The AU-US2yr spread is back to around -44bps, above recent lows of -55bps.
• The AUD/NZD cross is off earlier highs, back to 1.1045/50, from +1.1060 earlier. AUD/JPY is back sub 93.50, fresh lows for the session, as weaker equity sentiment weighs.