UBS Market Talk: FXWW

From the FXWW Chatroom: The US yield curve bull-flattened sharply following the cues from the UK bond market. Looking ahead, for July US payrolls, our economics team expects payrolls up 175k (consensus: 180k ) and private payrolls up 165k (consensus: 180k),  each marginally below their average monthly increase so for this year.  Markets will be paying particular attention to hour earnings given the recent soft inflation data. Bloomberg consensus expectation for Y/Y average hourly earnings is 2.4%.  We see average hourly earnings at 2.3% Y/Y.
In terms of markets, our analysis still suggests that the EUR is long-term cheap, we would tactically avoid chasing it higher here. The impact of a higher EUR on financial conditions and inflation makes the risk-reward unfavourable. The ECB is sending dovish signals, while easing US financial conditions raise risks to the “Fed Pause” markets are pricing in. For the data outside US, we have Canadian labor market report and June Retail Sales from Australia and Italy. (UBS)

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