China beat again overnight with HSBC services this time coming in at 53.1 vs consensus of 50.7, the highest print in a year (yesterday's Chinese manufacturing was the highest print for 2014).
The AUD/JPY (recent market leading carry trade over the last week or so) saw at least a 60-pip drop overnight and more since the NFP and all the other 8:30 data came out, this was on the back of weak retail sales in Australia and the RBA (Central Bank) governor telling the market that it is underestimating the chances of a AUD decline. He also said the RBA is not contemplating tightening policy at this time despite a rising housing market.
The USD/JPY was higher overnight, but didn't help the Nikkei much as most of the strength was due to dollar strength rather than Yen weakness.
The ECB policy announcement left rates unchanged even as Europe has weakened since the last policy decision to send the deposit facility to Negative Interest Rates (NIRP), rates remain unchanged with the Main refi rate at 0.15%, the Deposit rate at negative- 0.10% and the Marginal Lending rate at 0.40%.
Draghi's press conference was ongoing during the US data dump so there's likely a lot of algo confusion as to which headline to follow.
US Data
Initial Claims came in at 315k,
| Prior | Consensus | Consensus Range | Actual | |
| New Claims - Level | 312 K | 314 K | 307 K to 325 K | 315 K |
| 4-week Moving Average - Level | 314.25 K | 315.00 K | ||
| New Claims - Change | -2 K | 2 K |
This is a slight beat and in line with the 4 week moving average of 315k
US Trade Deficit saw a modest improvement, prior-$47.2 billion, today's print at -44.4bn on consensus of -45.1bn.
June Payrolls / NFP surge to beat expectations at +288k, above consensus of +215k and the whisper number of +245k, the unemployment rate dropped to 6.1% on consensus of 6.3%, well below the F_E_D's 6.5% target for policy tightening.
May's report was revised higher from 204k to a staggering 282k, this is the 5th consecutive month of gains >200k.
Private Payrolls came in at a 262K gain above consensus of +215k.
Hourly earnings came in as expected at +0.2% m.o.m. and 2% y.o.y. vs 1.9% expected., down from 2.1% in May, declining on a real basis when adjusted for inflation for 3 months in a row. The average NFP print has run around 272k.
The lower unemployment rate of 6.1% vs consensus of 6.3% was due to the magic of "People not counted in the labor force" which dropped to a new record of 92,120,000, up +111K from June, but we knew we'd see this as Congress failed to continue extended claims in their budget earlier this year which should have the cumulative effect of 3 million people dropping off unemployment during 2014 and no longer being counted as part of the work force despite whether or not they want a job.
The civilian employment to population ratio is at all time record cycle lows. The labor force
participation rate remained flat at 62.8%, matching the lowest print since 1978.
As a result, Gold is down, as we expected for a Gold pullback, Treasuries are down, USD is up , but losing some momentum as well as USD/JPY and ES as of the open...
We have even more data at 9:45 and 10 a.m. (PMI Services and ISM Non-Manufacturing) and an early close at 1 p.m.
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