Weak Jobs Print Resets Fed Bets, USD/Loonie Volatility Spikes

The US jobs report for July was weaker than expected, with a loss of 23,000 jobs. This marked a sharp contrast to forecasts of an 80,000 gain.

The unemployment rate fell to 4.1% from 4.2%, but the labor force participation rate dropped to 61.4%. The details were soft enough to trigger a market reaction, with stock futures jumping and Treasury yields falling.

This led traders to price out more aggressive Fed tightening, reducing September hike odds to around 44% from 58% before the report.

The labor market dynamics in the US are now at odds with those in Canada. The Canadian jobs report showed a gain of 75,000 jobs in July, exceeding forecasts and boosting the Loonie against the USD.