Jobs Just Right

Friday's non-farm payrolls report struck just the right tone for those hoping for a long period of ultra-low rates in the US. In a rare divergence of the antipodeans, the Australian dollar was the top-performing G10 currency while the New Zealand dollar lagged. CFTC positioning data continued to show shifts into CAD and EUR longs. Below is the latest technical picture for EUR net longs. For more info on how to us these IMM data, see 13:48 mins of this video 

Non-farm payrolls rose 559K compared to 675K expected. The miss was even larger than it looked because the market had priced in something stronger after ADP and there were fears about a number close to 1 million.

With the miss, the entire ADP-inspired pop in the US dollar evaporated. Treasury yields fell sharply with 10s down 7.2 bps to 1.55% and threatening the low of the range since early March.

The average of the two most-recent jobs reports is 418K jobs. In normal times that would be great but the US needs to create 8-10 million jobs to get back to pre-pandemic levels. At that pace it would take 19 months to recoup that plus they need to create at least 200K jobs a month for demographic changes.

What's especially troubling is that April and May should have been the easiest months for the US to add jobs with lockdown measures ending.

For the market though, it's a near-perfect report. Jobs are still strong enough to have solid economic growth and there's no need to worry about a premature taper.

This week starts off light on the economic calendar but there will be major focus on Thursday's CPI report. We get the sense though that the market is coming around to the Fed's view: That high inflation numbers will be temporary.

CFTC Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR +109K vs +104K prior

GBP +24K vs +31K prior

JPY -47K vs -50K prior

CHF -0K vs -1K prior

CAD +49K vs +45K prior

AUD -2K vs -1K prior

NZD +6K vs +8K prior