The US dollar is bleed steadily in the aftermath of non-farm pay reports. The data was mixed with softer headlines, but lower unemployment rates. Wages have risen, but benchmark revisions and working hours have been revised, suggesting a one-off effect.
The bond market considers it all bearish and we generate 4-5 bps across the curve. Usually it corresponded to higher US dollars and was certainly choppy following the report. However, the latest move in the US dollar is low, as shown by the rise in AUD/USD shown here.
AUD/USD 10 min
It is a rare divergence between the two, and may reflect the willingness to buy stocks and money flowing in that direction. The market also concludes that the trade war is digested where it stands for a week, and that it is unlikely that Trump will actually use tariffs on his major trading partners. But it remains a volatile metric.
Another dynamic is in Congress, where Trump has spoken about a massive tax cut that could potentially be $11 trillion from the deficit for a decade (and the deficit is already high). There may be some kind of developmental dynamic when yields increase, but when the deficit causes anxiety in USD, but it's hard to believe.
