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Markets look to September rate hikes from the Fed

July non-farm payrolls report saw the US economy adding 215k jobs with an upward revised numbers for May and June. The unemployment rate was unchanged at 5.3%. The US Dollar Index initially surged on the news, but soon settled back lower back to pre-NFP trading levels ahead of a quiet week.

Weekly Review

The July payrolls in the US saw the world’s largest economy add 215k full time jobs as the jobless rate remained at 5.3%, unchanged from June. Revisions to the May and June payrolls numbers also added an additional 14k jobs to mark an average payroll growth of 235k per month. This was quite a significant push from the first quarter's average job numbers of 195k. Although the July payrolls were nothing spectacular, the fact that data did not disappoint saw investors scurry to position themselves for an imminent rate hike in September. US 10-year Treasury note rose to 2.22% on Friday's close. USDJPY was trading in a tight range for the week, gaining 0.3% after a brief test to the weekly highs of 125.066 to settle the week at 124.207.

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The Week Ahead

The second week of the month is relatively quiet in comparison to the previous week. However, quite a few important economic data releases are lined up over the week. Most importantly, the UK jobs report is due on the 12th of August. Expectations are for the average earnings index to have risen at a slower pace of 2.8%, down from 3.2% previously. The UK unemployment rate is expected to remain steady at 5.6%. The British Pound's rally came under pressure last week as the BoE MPC voting members did not quite translate their hawkish view into votes with only one of the nine members voting for a 25bps rate hike. An upset in the July jobs report for the UK could see continued declines in the Cable in the coming week.

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