US Dollar slips following disappointing nonfarm payroll report
03/Jul/2015 • Currency Updates•
The Pound traded mostly within a narrow band of the US Dollar yesterday, appreciating by 0.1% versus the Greenback during the London session.
Attention among traders in the UK yesterday morning was on house prices, with Nationwide releasing its latest house prices data for June. Annual house price growth touched a two year low according to the latest Nationwide figures. Price growth registered just 3.3% on a year previous, down from the 4.6% increase in prices in May. While this is still comfortably outpacing earnings, the gap is now closing, helped by a sharp pick up in wages last month. Contrastingly, there was a steep increase in construction growth in the UK economy in June, according to the latest PMI survey from Markit. The index increased from 55.9 to 58.1, its fastest pace of growth since February. Confidence in the sector soared to its highest in eleven years, boding well for future economic growth in Britain.
Economic releases in the UK on Friday are in short supply, with Markit’s services PMI at 9.30am the only major announcement in an otherwise quiet day. Market movement is therefore likely to depend on reaction from yesterday’s nonfarm payroll data.
A disappointing nonfarm payroll report in the US meant the Euro finished 0.1% higher against the Dollar, while appreciating 0.1% versus the Pound.
On the Greece front, the IMF claimed the country would require an extra 50 billion Euros over the next three years in order to stabilise its finances under the existing bailout plans. Meanwhile, Alexis Tsipras continued to urge the Greek people to vote “no” to creditor’s proposals at this weekend’s referendum.
Yesterday we saw the release of the ECB’s latest meeting accounts. Policymakers claimed they were not concerned about rising bond yields, weaker equity prices, or a higher Euro exchange rate. The Governing Body also claimed that it was prepared to respond should these forces lead to weaker levels of economic growth or subdued inflation. However, this additional action is not seen as necessary at present. In terms of economic data, the producer price index was unchanged in May, down by 2% year on year.
There will be a string of economic announcements in the Eurozone today, mostly focused on the latest services PMI’s for Germany, France, Spain, and the wider Eurozone area. This will be followed by retail sales data from Eurostat at 10am London time.
The US Dollar ended the London trading session lower against its peers following disappointing data yesterday afternoon. The US Dollar index ended 0.25% down for the day.
A day early than usual due to Independence day in the US, the US Department of Labor released its latest labour report, including the all-important unemployment rate and nonfarm payrolls figure. Nonfarm payrolls increased by 223,000 last month, slightly down on expectations. Even more disappointing, figures for April and May were revised lower to show 60,000 fewer jobs were added than previously reported. However, encouragingly we saw strong employment figures, with the official unemployment rate plunging by 0.2% to 5.3%, its lowest since December 2008. In the same report, average earning were unchanged month on month following a decrease in mining and manufacturing wages.
Mostly overshadowed were the latest weekly jobless claims figures. The number of people claiming jobless benefits last week rose on previous to a five week high, climbing to 281,000, while the four week moving average increased slightly to 274,750. Elsewhere, factory orders decreased in May for the second consecutive month, down by 1% month on month.
Markets will be closed in the US today due to a national holiday to mark Independence Day. As a result, there will be no economic announcements or releases, and thus Dollar volatility will be dependent on events elsewhere.
Rest of the world
Sweden’s central bank, the Riksbank, cut its interest rate even further into negative territory yesterday, down from -0.25% to -0.35%. Policymakers cited worries about the Greek situation and uncertainty in economic conditions.