Open Account Trading Carries Risk

US June non-farm payrolls  (372K, 260K expected) came in much stronger than the analysts had expected. The unemployment rate (3.6%) and the average hourly earnings (0.3%) came in in line with expectations while the participation rate ticked 0.1% lower. (62.2%, 62.3% prior). 

This report provides the Fed with a green light to move ahead with aggressive rate hikes and as a result, the bond market is currently selling off and the yield-sensitive USDJPY is shooting higher in the intraday timeframes. Equity investors don’t like the take hikes so S&P 500 futures are taking a hit. Strong jobs report used to be great for stocks but in this inverted world we now live in good news is actually bad news. 

All in all, the report is another reminder that the employment market in the US is indeed still very strong. It will take a lot to dent it and the Fed knows it. Therefore, we should still expect to see Fed being quite comfortable in its aggressive approach.

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Janne Muta
Chief Market Analyst

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