This is the first time in the past 15 months that the actual NFP data has missed expectations. As a result, the US dollar weakens.

The Non-Farm Payroll data released during the New York session today (July 7th) disappointed the market, causing the US Dollar Index (DXY) to decline by around 0.4% to the range of 102.60. The US dollar also weakened against other currencies, particularly USD/JPY, which dropped over 1% to its lowest level in ten days, around 142.30. However, analysts believe this US labor market data does not disrupt expectations for future Federal Reserve interest rate hikes.

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The US Bureau of Labor Statistics reported that non-farm payroll employment increased by only 209k in June 2023, falling short of the consensus estimate of 225k. Meanwhile, the May 2023 payroll data was revised from 339k to 306k.

This is the first time in the past 15 months that the actual Non-Farm Payroll data has missed expectations. The weaker NFP data contradicts market expectations following yesterday's strong ADP and ISM reports. As a result, the market reacted negatively, and the US dollar weakened against all major currency pairs.

Other details in this US employment report package remain solid. The US unemployment rate decreased from 3.7% to 3.6%, per market expectations. Average Hourly Earnings grew by 0.4%, outperforming the consensus estimate of 0.3% (month-over-month). Both indicators indicate that inflationary pressures from the US labor market remain strong, confirming expectations of further Federal Reserve interest rate hikes as outlined by Jerome Powell.

"Overall, the cooling in hiring is a welcome development, but the pace is still above growth in the working-age population, and combined with continued wage pressures and the drop in the unemployment rate, this leaves the Fed on track to hike rates by 25 [basis points] in both July and September," said Katherine Judge, senior economist at CIBC.