NFP: Few surprises, labor market continues to gradually cool – Wells Fargo

Matías Salord FXStreet

Data released on Friday showed that Nonfarm Payrolls in the US rose by 187,000 in July, falling below the market consensus of 200,000. June's figures were also revised lower to 185,000, marking the lowest level since December 2020. Analysts at Wells Fargo point out that the slower pace of hiring in July indicates that the labor market continues to gradually cool.

Key quotes:

Overall, there were few surprises in this morning's employment report.

The labor market has continued to cool enough that underlying inflation pressures are easing, but not so much that the economy has tipped into a recession. Nonfarm payrolls have increased by less than 200K per month for two consecutive months, the first time that has happened since 2019 (excluding March/April 2020). That said, this pace of job growth is still comfortably above the ~100K jobs per month needed to keep the unemployment rate roughly flat in a steady participation environment.

The recent deceleration in the Employment Cost Index should temper the FOMC's concerns about today's stronger average hourly earnings data, but the still-elevated pace of job and wage growth, as well as very low unemployment, suggests rate cuts still remain a long ways off.

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

GBP/USD keeps the firm tone above 1.3600

GBP/USD clings to its daily gains, although it gives back some of them and recedes toward the 1.3630-1.3620 band on Thursday. Cable’s uptick comes despite the modest bounce in the Greenback, while investors gear up for key data releases on the UK calendar on Friday.

EUR/USD treads water near 1.1670

EUR/USD gives away all its initial gains and receded to the sub-1.1700 region. The US Dollar’s late recovery has dragged the pair lower, leaving it practically unchanged following the NA session on Thursday. In the meantime, investors gear up for the release of preliminary S&P Global Manufacturing and Services PMIs on both sides of the Atlantic on Friday.

Gold trims losses, back above $4,500

Gold manages to regain some composure and reclaim the area beyond the key $4,500 mark per troy ounce on Thursday. The yellow metal’s daily decline comes amid the humble improvement in the US Dollar while US Treasury yields remain on the rise following Wednesday’s marked retracement across the curve.

XRP extends rally as bullish technical signals underpin breakout attempt

Ripple holds in bullish hands, as price action extends above $1.16 at the time of writing on Thursday. Since Monday, the cross-border remittance token has surged by more than 20%, reflecting a steady growth in risk-on sentiment. The broader crypto market sentiment is on an upward roll at 62 in the Greed territory on Thursday, up from 46 the previous day, according to the Fear & Greed Index.

Why long bonds have repriced the cost of money

The 30-year Treasury is 12 basis points below its highest level since before the financial crisis. Not its highest since 2023, or since the tightening cycle, but since June 12, 2007, the last time the longest bond in the world's deepest market yielded what it yields on Thursday. Getting there took two attempts and most of the year.

$20 billion offered, $2 billion taken: Why Treasury doubled its buyback cap

The US Treasury moved off its own calendar on Wednesday, and that is the part worth sitting with. At 12:32 GMT, the department said it would at least double the size of liquidity support buyback operations in the 10-year to 20-year and 20-year to 30-year sectors, lifting the maximum from $2 billion per operation to at least $4 billion, effective September 9 and running to November 4.