Strong Jobs Report Drives AUD Outperformance, Hawkish Fedspeak Props Up USD

Continued hawkish drumbeat from Fed officials set the tone of morning trade in Asia, generating light risk-off flows (which petered out as the session progressed) and putting a bid into the greenback. Cleveland Fed's Mester ('22 voter) called for at least a 75bp rate hike at the next FOMC meeting, but kicked the can down the road re: necessity of a 100bp move. Separately, San Francisco Fed's Daly ('24 voter) told the NYT that she would most likely support a 75bp hike, but a 100bp rate rise is "in range of possibilities."

• Anticipation of increasingly hawkish posturing from the Fed raised the prospect of further widening in U.S./Japan yield gap, with the BoJ committed to keep local interest rates rock bottom. This rendered the yen vulnerable, with USD/JPY climbing into the Tokyo fix to print a fresh cyclical high at Y138.12. Japan's Chief Cabinet Secretary Matsuno said officials will watch FX moves with heightened sense of urgency, but his comments provided only brief, mild reprieve to the yen.
• A stellar labour force survey allowed the Aussie dollar to regain poise and eventually top the G10 scoreboard amid aggressive addition of hawkish RBA bets. The report showed that employment grew by 88.4k in June, far exceeding expectations of all economists surveyed by Bloomberg, with the unemployment rate dropping to a multi-decade low. The OIS strip now prices ~57bp worth of tightening at the RBA's August meeting, suggesting that some participants are bracing for a 75bp hike to the cash rate target.
• Trans-Tasman spillover lent a helping hand to the kiwi dollar, albeit it understandably lagged its Antipodean cousin. AUD/NZD showed above yesterday's peak, even as AU/NZ 2-Year swap spread is back to virtually neutral levels after some minor perturbations caused by Australian jobs data.
• Swedish CPI as well as U.S. PPI & jobless claims will take focus later in the day. Comments are due from Fed's Waller and ECB's Centeno.