US ADP jobs surprise drives US bond yields to highs
The US dollar was mostly higher through Asia overnight after another strong reading from the US labour market sparked fears ahead of tonight’s all-important non-farm payrolls report.
The private-sector ADP jobs report found a massive 497k jobs had been added to the US employment market – well above the 226k forecast.
The US JOLTS job openings and weekly unemployment claims numbers were broadly in line with expectations.
The jobs news caused markets to continue to speculate about further US interest rates hikes with the US two-year bond yield jumping to the highest level since the global financial crisis overnight. The US two-year bond yield ended at 4.99%.
The move in US bond yields continues to drive an inversion of the yield curve with the US three-month / 10-year curve at the steepest inversion in over 40 years. Historically, this type of inversion has signaled a US recession, but the US economy has remained resilient this time – so far.
Aussie, kiwi lower, but eyes on USD/JPY
The US dollar was initially higher before reversing, but some obvious pockets of USD weakness were noticeable overnight.
The AUD/USD and NZD/USD both fell 0.4%.
The USD/SGD and USD/CNH were both broadly flat.
The USD ended lower in Europe; however, the key move was a reversal in the USD/JPY.
The USD/JPY turned sharply lower from the key 145.00 level that has been identified as a potential level for intervention by Japan’s Ministry of Finance. The MoF intervened at 145.00 in September last year to contain JPY weakness.
The JPY gained in other markets.
US non-farm payrolls key
Tonight, the US non-farm payrolls report, due at 10.30pm AEST, will be critical.
The US jobs report has beaten forecasts at every release since March 2022 and has only missed forecasts once since 2021.
This strong run of jobs growth has contributed to inflationary pressures – a strong labour market drives wages growth – so another better-than-expected result might pile further pressure on to the Federal Reserve and boost the US dollar.
The market is looking for 225k new jobs (from 339k last month) with the unemployment report forecast to fall from 3.7% to 3.6%.
Japanese yen gains as USD/JPY falls
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 3 – 7 July
All times AEST
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
