After this morning’s release of Nonfarm Payroll data for the month of June missed expectations and the prior month’s reading was revised down, the United States Dollar starts today’s trading session on the back foot against all major currencies.
Overview
Today’s data release showed that the US economy added a paltry 209,000 jobs last month, below expectations of 230,000. May’s figure was also revised down to 306,000, a decline of 33,000.
These figures are in direct contrast to yesterday’s employment data from ADP, which gave traders the idea that the US jobs market was continuing its remarkable hot streak in the face of tightening action from the Federal Reserve. Yesterday’s reading put further pressure on the Fed, who have cited the need to cool off the US economy to tame inflation, but today’s data actually helps the central bank stick to their narrative. This sign of cooling means that the Fed’s proposed two further hikes may be enough to shore up the inflation picture for the larger economy. It’s odd that a data miss can actually be a good thing for the US economy, but in this case, it’s likely today’s release is welcome news for the Fed after yesterday’s pressure.
While job growth is slowing down, wage growth does remain stronger than expected, keeping two more rate hikes from the Fed in play. Expectations for this tightening cycle remain largely unchanged amongst traders – a 25 basis point hike in July is widely expected, with one more to follow in either September or October. The Buck is losing ground this morning, but not swinging as wildly as some might expect.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
Holiday Donation Results – Thanks for Helping!
Earlier this year, Monex made a donation in honor of your continued trust in us for your FX needs. We’re happy to report that each charity received a percentage of an overall amount based on your votes. Thank you for participating! View Results
Monex USA introduces OPTIONS
With currency exchange rates in a constant state of flux, companies transacting cross-border face the risk of losing substantial sums of money if they fail to hedge their exposure to these shifts. Monex USA now offers a wide range of FX options that could help your business better manage risk. Learn More
GBP ⇑
Pound Sterling is a winner on the G10 board this morning as resilient inflation in the UK economy is prompting traders to price in an unprecedented second consecutive 50 basis point hike from the Bank of England in August. We’ve discussed previously the importance of divergent interest rates from major central banks, and it looks likely this will come into play for GBP versus USD later this year. The implied terminal rate for this tightening cycle from the BoE is up close to 6.5%, substantially higher than expectations for the Fed.
CAD ⇑
Canadian Loonie also finds itself with a bout of strength against the Buck this morning on the heels of Canadian employment data. In contrast with the US numbers today, the Canadian economy added 60,000 jobs last month, well above expectations of 20,000. This keeps pressure on the Bank of Canada, which meets next week, and chances of a hike have jumped from 55% to 66% at the time of writing.
