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AUD on Top as Employment Change Surges Ahead of Expectations, U/E Rate Drops

FOREX
  • AUD trades firmly, outperforming all others in G10 following the solid June jobs report. Australia added 32.6k jobs across the month, doubling market expectations. This helped pressure the unemployment down to 3.5%, which also saw the previous outturn revised lower. AUD/NZD erased yesterday's losses in response, rallying to test yesterday's highs at 1.0885 and returning above the 100- and 50-dmas.
  • The USD Index remains weak and has staged only a lacklustre bounce off the July lows despite receiving some underlying support from the front-end of the US yield curve. US 2y yields have added close to 20bps off the post-CPI lows, hitting new recovery highs ahead of the NY crossover today.
  • GBP is softer for a second session, extending the reaction to the lower-than-expected UK inflation release posted yesterday morning. EUR/GBP is yet to challenge yesterday's highs of 0.8701, which looks like firm resistance ahead of the 100- and 200-dmas of 0.8704 and 0.8730.
  • Lastly. USD/CNH showed a little more than 600 pips below its Wednesday high in Asia-Pac hours, as the redback benefitted from a much stronger-than-expected lean in the USD/CNY mid-point fixing (resulting in a 680-pip mid-point/BBG survey differential, the widest spread seen since last year’s yuan tumult). The PBoC also tweaked limits to allow companies to borrow more overseas, opening the door to the potential for an uptick in capital inflows, providing further support to the yuan.
  • Highlights of the session ahead include weekly US jobless claims data as well as existing home sales for June. Advance Eurozone consumer confidence data is also set to cross, however no central bank speakers are due.
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