US FX WRAP: Dollar gains on better-than-expected NFP report

USD was slightly firmer, tracking higher US 2yr yields in response to a stronger-than-expected NFP report. Headline grew 162k above the 55k expected, with +55k revisions to the two prior months and the unemployment rate holding steady at 4.1%. The report has slightly boosted rate hike expectations for the FOMC Sept meeting; however, an above-expected CPI/PPI report may still be required for Fed members to tighten; otherwise, a Waller approach may be taken: "Can give disinflation a chance, we can wait one meeting". Outside of US data & Fed policy, newsflow was generally light. US President Trump, speaking to reporters, said they may hit Pickaxe Mountain very soon, a site that has been linked to Iran's nuclear site, yet has not been subject to strikes. DXY traded higher to 99.14, yet still down -0.5% on the week, with all eyes on next week's CPI and PPI reports.

CAD was weaker as a hot NFP and poor Canadian jobs report weighed. In Canada, employment growth unexpectedly went negative, -41.7k vs exp. +15k. The unemployment rate remained at 6.4% as expected, with the participation rate declining to 65.0% from 65.1%. The report saw Canadian 2-year yields move lower as markets walked back some of the hike expectations through 2026 and 2027. BoC policymakers earlier this week noted increased upside risks to the inflation outlook amid higher gasoline prices and the potential need for policy adjustments if broadening occurs; however, today's jobs report highlights the unstable labour environment, which will likely keep policymakers in a patient wait-and-see approach. USD/CAD hit highs of 1.3872, before trimming to 1.3839.