US Non-Farm Payrolls Decline Amidst Currency Intervention

The US non-farm payrolls unexpectedly fell by 23,000 in July, marking the first decline since February. The unemployment rate dropped to 4.1%, but the downward revisions to May and June's data indicate a weakening labor market.

This complicates the Federal Reserve's policy decisions between inflation and employment, as officials have differing views on interest rate hikes. A recent joint currency intervention by the US and Japan suggests that the exchange rate issue is no longer just Japan's concern but also affects US Treasury holdings and dollar liquidity.

The sharp decline in stock prices following earnings reports from SanDisk and Western Digital reflects concerns over capital efficiency and valuation tolerance, particularly in the AI industry. The market needs to observe whether the cooling employment can offset inflation and fiscal pressures on long-term interest rates, and whether high capital expenditures in AI can translate into sufficient cash flows.

The US July CPI release will be crucial for verifying if inflation remains sticky or cools down with employment. If this is the case, the pressure of high rates on global risk assets may ease significantly.