BoE wants policy flexibility.

US non-farm payrolls increased 528,000 for July, well above consensus forecasts of a 250,000 gain and the June increases was revised to 398,000 from the previous reading of 372,000. Manufacturing jobs increased 30,000 on the month with all major sectors posting job gains while there was an increase in government jobs of over 50,000 on the month.

The unemployment rate edged lower to 3.5% from 3.6% and slightly below market expectations. There was, however, a slight decline in the participation rate with the household survey recording a more subdued increase of 179,000 in the number of employed for the month.

Average hourly earnings increased 0.5% compared with expectations of 0.3% with an annual increase holding at 5.2% and above expectations of 4.9%.

The strong data triggered fresh concerns over the inflation threat.

Treasuries dipped sharply after the US jobs data with the 1-year yield increasing to a peak above 2.86% before a slight retreat to 2.83% on Monday.

In comments over the weekend, Fed Governor Bowman stated that inflation is much too high and she wants unequivocal evidence of inflation cooling before changing her outlook. In this context, she stated that she is seeing few if any signs of peak inflation and further hikes of 75 basis points should be on the table until evidence of weaker inflation pressure is forthcoming.

The latest US consumer prices data will be released on Wednesday which will be crucial for expectations.

The latest Canadian jobs data recorded an employment decline of 30,000 for July compared with expectations of a small increase and the second successive decline.

The unemployment rate, however, held at 4.9% and in line with market expectations.

Chef Economist Pill stated that the bank is attempting to maintain an element of flexibility in its decision making. In this context, the bank wanted room for manoeuvre to either continue rate hikes or engage in a pause in the hiking process given the very high degree of uncertainty. He added that markets should not assume that there will be a further 50 basis-point hike at the September meeting.

Euro-Zone developments had little impact on Friday with a marginal increase in German industrial production not offering reassurance. The US currency was boosted by a surge in yields following the data. The dollar overall posted strong gains after the US jobs data. EUR/USD dipped to lows near 1.0150 before recovering slightly to 1.0180 with little change on Monday.

USD/JPY surged to a peak just above 135.50 on Monday before fading slightly.

The Swiss franc was little changed on the day as markets monitored yield trends. EUR/CHF settled just below 0.9800 with USD/CHF highs at 0.9650 before a retreat to 0.9610.

Rhetoric from Bank of England chief economist Pill maintained uncertainty over the BoE outlook. Sterling was influenced primarily by global trends. GBP/USD slipped sharply to lows close to 1.2000 after the US jobs data before a recovery to 1.2080.

Commodity currencies were hurt by a stronger US dollar and a dip in equities. AUD/USD retreated to lows at 0.6870 before a rebound to 0.6935 on Monday. Weaker jobs data undermined the Canadian dollar. USD/CAD strengthened sharply to highs at 1.2985 before a retreat to 1.2930 on Monday.

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