EUR/USD, USD/JPY, DXY flows: Good upside on payrolls, though earnings steady. CPI more critical
Good upside on the payrolls data, at least outside of earnings, suggests momentum stays solid
Fed will probably stick to view that labor market healthy, firm and generally balanced, especially with earnings not accelerating
That leaves inflation data as the key policy data factor
Pretty solid upside surprise on the headline at 162k, around 100k above market and with the prior month also revised up by 40k into positive. Mainly reflected in the private figure too.
With upward revision, the last 2 month average for private is about 100k a month now, which is solid by recent standards given the labor force.
Unemployment stays at 4.1%, so on the tight side of balanced.
Average earnings stay modest at 3.1% from 3.2% and there is a compositional element to this moderate trend of late because of rotation in the labor force across age segments (older higher earnings leaving) and in terms of entrants vs exits that net tends to cap
Data overall is not going to challenge the Fed view that the labor market remains solid, stable and broadly balanced and that growth also remains also solid and if anything more firm than expected to date. What this leaves is the inflation picture as the key part of the equation that some on the Fed seem to view as the near-term decider.
Dollar thus given a kneejerk boost but a modest boost, and with EUR/USD not that far from the 1.16~ options level still. USD/JPY has been correcting but should find supply on the retracement at this point. Next week’s CPI will be more critical.