Trade Surplus Surprise Ahead of Payrolls

• Middle East tensions re-escalated overnight, with fresh Houthi attacks and reports that Iran is seeking greater control over shipping through the Strait of Hormuz. Brent crude rose 5% to around US$83.50/bbl, rebuilding some inflation risk premium across global markets.
• Australia’s trade balance unexpectedly returned to an AUD1.9 billion surplus in June, against expectations for an AUD1.1 billion deficit. While supportive for growth, the result is unlikely to materially alter the RBA’s outlook, with inflation and labour market data continuing to drive rate expectations.
• US jobless claims remained subdued at 199,000, below expectations of 202,000, reinforcing signs the labour market remains resilient. Stronger-than-expected productivity growth also helped keep unit labour costs contained at 1.3% in Q2.
• Attention now turns to tonight’s US non-farm payrolls, with markets expecting around 82,000 new jobs and 4.2% unemployment. The report will provide the next key test of labour market resilience and whether inflation pressures are easing sufficiently to keep the Fed on hold.