Summary:

• Australian labour market paints the rosy picture producing a stunning jobs release for June
• Stocks in Asia mixed, BoJ cuts its JGBs purchases once again
• Yuan offshore slides as speculators increase their involvement

The most important point coming from Asian hours trading is undoubtedly the labour market report from Australia. The release came in well above expectations sending the Aussie much higher overnight. The increase has erased to some extent since then, however, the Aussie is holding the first place in terms of the best performing major currencies in the morning. What caused such a rally on the AUD? Just take a look at the chart below to answer the question.

The Australian jobs market keeps booming reflecting a strong domestic demand. Source: Macrobond, XTB Research

First of all, employment (overall) grew as much as 50.9k smashing the consensus placed at 16.5k (the prior reading was revised upwardly to 13.4k from 12k), and the number became yet more upbeat when we looked into the details. Namely, full-time employment picked up 41.2k (the May’s value was revised to -19.9k from -20.6k), whereas part-time employment increased by 9.7k, and here we were offered an upward revision as well (to 33.4k from 32.6k). It sounds pretty well, doesn’t it? However, it is not the end of this Australian tale. The next crucial point is the steady unemployment rate (5.4%) marching the consensus, and a jump in the labour force participation rate to 65.7% from 65.5% while no change had been expected. It tells as that the strong labour market conditions were enough to draw more people into the market (the qualitative improvement) and even so the additional amount of them were absorbed keeping the jobless rate unchanged. Nonetheless, it does not change the overall outlook for the RBA monetary policy, and any rate hikes this and at the beginning of the next year seem to be like a pipe dream.

Anyway, the Aussie jumped right off the bat after the report was released. Albeit, since then this move has bee trimmed and right now it looks as if bears would head toward 0.7400 from where we can see an increased involvement of buyers. Source: xStation5

Looking across Asian equities one may notice that there has been no a common ground today. Admittedly, the Australian benchmark has risen almost 0.4% as of 6:50 am BST, stocks in China have fallen (Hang Seng is down 0.5% at the time of writing). In turn, the Japanese NIKKEI is treading water after the Bank of Japan decided to cut its JGBs purchases once again. It bought 60 billion JPY of JGBs with a maturity of 25-40 years against 70 billion JPY previously, and it bought 180 billion JPY of bonds with a maturity between 10 and 25 years against 190 billion JPY at the previous operation. It obviously did not impact the 10Y yield as the BoJ’s policy is aimed at keeping this yield close to 0%.

The Chinese stock market has begun another day in a row higher, and then it has not been able to retain these gains. The key support remains at 10440 points. Source: xStation5

Finally, it appears that the Chinese yuan deserves more attention again. The PBoC set overnight the reference point for the onshore yuan against the US dollar (USDCNY) at 6.7066 (another day higher compared to the previous one), and steady falls are seen as response to US tariffs. However, even more interesting things happen on the offshore yuan as it has slid against the greenback from from below 6.75 to almost 6.78 at the time of writing (7:00 am BST) reflecting that speculative traders have become yet more eager to bet against the Chinese offshore currency. However, do remember that this is the dangerous strategy as it could one day spur the PBoC to slash liquidity so as to push money market rates higher and thereby spooking speculators. But, so far so good and traders do not seem to be particularly worried about it.