Conservatives’ candidates back tax cuts.

US non-farm payrolls increased 372,000 for June after a revised 384,000 increase the previous month and above consensus forecasts of a 265,000 increase. All sectors recorded an increase in jobs on the month with a 29,000 gain for manufacturing and rebound in retail jobs. There was an increase in private-sector jobs of 381,000 private-sector jobs while government jobs edged lower.

The unemployment rate held at 3.6% and there was a small decline in the participation rate as the labour-force survey recorded a decline of 315,000 in the number employed. The monthly increase in average earnings met expectations at 0.3% with the annual increase at 5.1% from 5.3%.

Atlanta Fed President Bostic stated that the economy is starting to slow and that is what is needed. He did, however, add that the labour market still has a lot of momentum and that he was supportive of a 75 basis-point rate hike at the July meeting.

New York Fed President Williams stated there should be a debate between a 50 or 75 basis-point rate hike in July with expectations of rates at 3.0-3.50% at year-end.

A lower participation rate will cause some Fed reservations.

Treasuries overall lost further ground on Friday with the 10-year yield increasing to 3.08% despite the mixed jobs data. Higher yields provided underlying dollar support.

After brief gains on Friday following the assignation of former President Abe, the yen was subjected to renewed selling on Monday as overall yield trends remained dominant.

USD/JPY posted a net advance to 23-year highs at 137.25 before a limited correction.

Canada reported an employment decline of 43,000 for June compared with expectations of an increase of around 20,000 with a dip of close to 40,000 in part-time jobs.

The unemployment rate, however, declined to 4.9% from 5.1% and the lowest reported rate for over 50 years.

Conservative Party candidates tended to focus on the potential for tax cuts which will maintain expectations of a looser fiscal policy and also bolster expectations that the Bank of England will adopt a more restrictive policy stance.

Confidence in the Euro-Zone economy remained notably fragile with only a slight decline in European gas prices. There were further doubts whether the ECB could engage in significant tightening given economic pressures. There was limited position adjustment after the US jobs data with a covering of Euro shorts. EUR/USD rallied to 1.0185 from fresh 19-year lows below 1.0075 before fading to 1.0140 on Monday.

Higher US yields secured limited support for the dollar against the yen. USD/JPY settled just above 136.00 on Friday before a fresh surge to 23-year highs at 137.25 on Monday. EUR/JPY also strengthened to just above 139.00.

The Swiss franc lost some ground as risk appetite stabilised. EUR/CHF strengthened to 0.9950 with USD/CHF around 0.9790 on Monday.

Sterling also secured an element of short covering, especially with expectations of a more aggressive fiscal policy supporting Bank of England rate expectations. GBP/USD edged above 1.2000 before settling below this level at around 1.1970 on Monday. GBP/EUR edged higher to 0.8465.

The Canadian dollar recovered from initial losses after the jobs data with USD/CAD below 1.2950 before moving higher to 1.2990 on Monday. AUD/USD failed to hold intra-day gains on Friday with a retreat to 0.6810 on Monday as risk appetite dipped again.