After four straight sessions of sustained gains against the G10, the United States Dollar has finally found some downside this morning after the July Non-Farm Payroll report showed that the US added slightly fewer jobs than expected last month.
Overview
Coming in at 187,000 versus expectations of a 200,000 gain, this is (once again) a marked difference from the ADP payroll estimates released earlier this week, but not a huge surprise to the downside. The report also showed that hourly earnings increased and unemployment went down – a mixed bag of data overall, but providing some downside for USD.
On a large scale, this report does very little to change the Federal Reserve’s path forward for the remainder of the year. Markets still believe there is more chance that rates will remain steady through the next two meetings rather than that of a 25 basis point hike. Jerome Powell, at last week’s meeting, did stress that no future move from the Fed is set in stone and traders should not try to discern what actions will be taken to either continue or finish this tightening cycle.
Economists are generally hoping that a cooling labor market will help to un-stick core inflation rates and give the Fed room to hold rates steady through the remainder of the year rather than adding another hike to the US’s already historically high-interest rate. Equity markets seem to believe that this could be the case, and the US stock market is set to open higher this morning after a rough week.
What to Watch Today…
- No major economic events are scheduled for today
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GBP ⇑
Pound Sterling has recovered most of its losses from the week this morning, rising more than half a percent against the Buck. The Bank of England’s “dovish hike” yesterday prompted some volatile trading, but the raw reading of an increased interest rate was slightly GBP positive. It’s still more likely than not that UK GDP, released next week, will show that the economy did not grow at all last quarter, but expectations of further rate hikes from the BoE are keeping the Pound afloat for now.
CAD ⇓
The Canadian Dollar is one of the very few losers against the USD this morning after Canadian employment data released showed the nation actually lost jobs last month, a stark contrast from the same figure out of the US. Canada’s unemployment rate rose to 5.5%, and the data as a whole paint a picture of a softening labor market. It’s increasingly unlikely that the Bank of Canada will raise interest rates at its meeting at the beginning of September, giving more downside to the Loonie against USD in particular
