US equities were stronger on Thursday, with the S&P closing 0.5% higher after a great beat on payrolls in June. But the less impressive jobless claims data soured the sweet mix. European equities fared better, Stoxx600 rose 2%.

Overall, it was good but not too good of a report, which suggests the Feds will remain accommodative for as far as the eye can see.

With the re-imposition of soft lockdowns, the leisure and hospitality employees are likely to see further volatility in their employment status. That will create a challenge to predict employment reports as re-closing will be an issue for further significant gains.

It would be tough to take the better-than-expected US June non-farm payrolls numbers and extrapolate that there will be a V-shaped recovery in the US. The economy has brought back only about 30% of the jobs lost.

The evolution of continuing claims as a critical metric also suggests the Fed will keep a steady hand. The higher frequency jobless claims number suggests the initial bounce-back has ground to a halt.

On first blush, it’s shaping up to be the reverse square root recovery?

There are two reasons why the knee-jerk price action of higher yields and a weaker dollar following the US June employment report faded and reversed.

· The NFP report is a mid-June snapshot, which might have been the “sweet spot” of near-term employment optimism as the virus situation in the US has deteriorated sharply since.

· Also, the substantial jobs numbers may provide fodder for the Republican fiscal hawks to resist further budgetary support to be decided on later this month.

Both seem good reasons to dismiss Thursday’s report mainly in terms of a significant directional signal, though equities seem less bothered than bond desks.

This morning it is not entirely clear what to make of yet another massive upside surprise in the US employment report.

May’s NFP was a market mover, but for the June report, I think we are back in a place where the data will not matter again.

With flare-ups in The South and the nascent re-opening not looking especially grand, the path of the virus and the re-opening are more critical than June jobs numbers.

Universities and restaurants are a particular source of re-opening angst and uncertainty, even in virus cold spots such as NY, NJ, and CT. Even my colleagues in NY and NJ are expressing concerns about sending the kids off to university.

Gold moves higher

Gold shrugged off useful job data, and despite investor risk-on appetite, the yellow metal moved higher. Gold has unwavering support from COVID-19 associated economic risks.

Despite the recent run of market-beating data, gold investors remain more worried about the economy over the medium term, especially with geopolitical and trade concerns simmering on the back burner.

Gold’s modest comeback ahead of the US holiday weekend is in itself an impressive feat. When good economic news becomes good news for gold, it ultimately points to underlying strength in bullion.

St Louis Fed President James Bullard stresses downside risks to the US economic outlook in an echo of recent Fed speak playing down signs of a cyclical recovery. Put another way: the monetary policy will be left ultra-accommodative for the foreseeable future.

These issues should be enough to support gold, especially as trade and geopolitical risks do not appear easing. Also, there’s enough return of inflation volatility getting priced in the market that in itself gives more than enough good cause to buy gold.

Currency markets

As ever, multiple cross-currents are weighing on the risk mood, so the market’s steady but upbeat tone this morning requires a selective approach to currency risk. But given its Friday of a July 4th weekend, and considering whatever view we take this morning will likely be faded in London.

The US dollar had yet another ambiguous relationship with improving US economic data. The USD could rally based on the improved outlook for the economy, or it could weaken based on a diminished safe-haven bid.

The dollar’s final feedback loop to the non-farm payroll report offers no clear reaction function just the fact that the currency markets remain tethered to a hyperactive “risk-on risk-off” Yo-Yo string.

For the dollar bulls, in contrast to the US data on employment, which is reverting the V-shaped attrition of March and April followed by the subsequent recovery, the Eurozone’s unemployment rate has only nudged higher during the economic lockdown.

International markets analysis and insights from Stephen Innes, Chief Global Market Strategist at AxiCorp