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he US non-farm payrolls headline rise of 287k comfortably exceeded expectations (180k) but wasn’t backed up by the subsidiary details in the report with the unemployment rate higher, small net downward revision to the prior two months payrolls and hourly earnings up just 0.1%.

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The US non-farm payrolls headline rise of 287k comfortably exceeded expectations (180k) but wasn’t backed up by the subsidiary details in the report with the unemployment rate higher, small net downward revision to the prior two months payrolls and hourly earnings up just 0.1%. (Today’s title is from the Clash, railing against the unemployed being forced into low-level, dead end jobs). The data was seen as validating a continued wait-and-see approach from the Fed, with no US primary dealer surveyed after the data believing the Fed will move before December even if the prospects for a September move are now less negligible than prior to the payrolls report (12% implied probability up from 7%).

The S&P 500 briefly rallied through its May 2015 record high closing level before finishing just 1 point beneath at 2129.9 (+1.53% or 32 points). The VIX lost 1.56 to 13.2, just above its year-to-date low of 13.1 seen on 1 April.  In bonds, the knee-jerk sell-off in 10 year Treasuries was soon bought back, yields finishing 2.7bps lower at 1.359%. Only the very front end saw net yield gains on the day, 2s +1.6bps to 0.607%.

In FX, the payroll headline couldn’t boost the US dollar more than temporarily, Bloomberg’s BBDXY index ending in NY -0.31%. The narrower DXY closed just 0.03% lower at 96.33, with USD/JPY -0.23% to ¥100.54 (with a post-NFP low of ¥100.06) and EUR/USD -0.11% at 1.1051.  AUD/USD was the best performer Friday, +1.2% to 0.7569 and where we’d note the fall in the VIX as a key driver. NZD was not far behind and second best performer, +1.08% to 0.7306 and a post-May 2015 high.  USD/CAD +0.32% to 1.3044, underperformance linked in part to the poor Canadian employment report (overall employment -700 with part time employment +39.4k and full time employment -40.1k.

Commodities, bar gold, all rallied Friday, presumably buoyed by the growth signal from US payrolls as well as a slightly softer US dollar. WTI crude added 30 cents to $45.41 and Brent +$0.40 to $46.76. The LMEX index gained 0.95% and iron ore 10 cents to $55.17.  Gold lost $3.70 to $1358.40.

Published on Sunday, China June CPI rose by 1.9% Y/Y (1.8%E, 2.0%P) with food prices +4.6% Y/Y and non-food +1.2%. PPI was -2.6% (-2.5%E, -2.8%P).

CoreLogic’s weekend Australian housing market summary reports a preliminary nationwide auction clearance rate of 72.0% up from last week’s final 67.0%. Uncertainty ahead of, and then subsequent to, the July 2 federal elections supressed auction volumes which were well down on the comparable periods of last year. Melbourne cleared a preliminary 71.9% (66.7%) and Sydney 79.0% (78.4%)

Coming Up

Given the failure of Friday’s US payroll headline to provide support for the US dollar and with risk appetite close to year-to-date highs, it will likely require this week’s domestic event risk highlights (NAB business survey on Tuesday, consume confidence on Wednesday and labour market data on Thursday) to collectively produce heightened expectations of August RBA easing if a renewed push above 0.76 on AUD/USD – and even a re-test of the 0.7648 24 June high – is to be prevented.

Internationally, there’ll be keener than usual interest in Thursday’s Bank of England meeting, though we suspect that if there is to be some form of post-referendum policy easing, it will more likely come in August than this month (the latter being an Inflation Report meeting date).

It’s Super Friday in China with June quarter GDP due and where annual growth is expected to have slipped to 6.6% from 6.7%. We also get the June monthly activity readings covering retail sales, industrial production and fixed asset investment and before that, on Wednesday, the June trade figures.

In the US it’s a lighter data week initially before Retail sales, CPI and Consumer Sentiment all on Friday.  The Fed releases its Beige Book on Wednesday and there are no less than 12 Fed appearances, including the two from President Mester in Sydney

Overnight

On global stock markets, the S&P 500 was +1.44%. Bond markets saw US 10-years -2.71bp to 1.36%. In commodities, Brent crude oil -4.18% to $46.76, gold-0.6% to $1,358, iron ore -1.4% to $55.17. AUD is at 0.7566 and the range since Friday 5pm Sydney time is 0.7493 to 0.7574.

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