US non-farm payrolls fall 131,000, private sector jobs rise 71,000; unemployment rate steady at 9.5%; weaker than expected Chair of White House Council of Economic Advisers Christina Romer resigns UK NIESR sees UK GDP slower ahead on austerity Goldman Sachs predicts Fed will announce reinvestment of MBS paydowns into Treasuries or more mortgage-backed bonds, unemployment to rise back to 10% US consumer credit falls $1.30 bln in June; less than expected S&P loses 2% intraday. closes down 0.4% US bond yields slide in anticipation of further Fed action at Tuesday’s FOMC meeting; 2-year notes close at 0.505%, a new record. 10-year notes close at 2.825%. The dollar fell sharply across the board in the wake of a US employment report which contained very few bright spots. EUR/USD overcame recent highs at 1.3262 and barriers at 1.3300 on the way to intraday highs at 1.3334. EUR/USD eased to retest the breakout in the low 1.3260s in early afternoon trade before bouncing to the 1.3280s late in the day. Cable got a shot of adrenalin from the employment report which saw the pair vault the former resistance area at 1.5970, the 61.8% retracement of the decline from 1.7045. The rally extended to 1.5999 but was unable to trigger barrier options at the 1.6000 level. We dipped into the mid- 1.5960s late in the day. USD/JPY fell as low as 85.02 after the figures, trying to trigger barrier options at 85.00 and stops below 84.82 support which dates back to early November of last year. The effort was for naught as protection of the barriers proved sufficient to hold back the tide. Slumping US bond yields were a major catalyst for the slide to new 2010 lows. Failing to trigger the barriers, the market edged higher in afternoon trade, rising toward the 85.40 area late. A record low close in US 2-year note yields helped contain rebounds in the near-term. Commodity currencies were a mixed bag. AUD/USD rallied along with EUR and GBP, breaking to new trend highs at 0.9221. Risk aversion helped prompt profit-taking from there, knocking the pair to New York lows of 0.9141. Prices recovered late as stocks pared sharp losses late in the session. Volatile wheat prices were a factor in Aussies weakness as the grain fell its price limit in Chicago today after sprinting higher yesterday on the Russian export ban. USD/CAD was the outlier today, rallying as Canada had poor employment figures of its own, dimming hopes for a near-term rate hike. We rallied from 1.0165 to 1.0305 before the rally relented.

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