Daily Market Update

Mixed Payrolls Dent Dollar

July 05, 2024

Following the release of June’s non-farm payrolls this morning, the United States Dollar is a touch weaker against all G10 currencies and is set to wrap its first weekly loss in seven. 


Though on the surface the addition of 206,000 jobs last month was above market expectations, a large revision for May’s figure and a change in unemployment rate is keeping the Dollar on the back foot today. Questions, as well, continue to swirl around Joe Biden’s failing presidential campaign and today USD is distinctly lacking the safe haven luster markets have become accustomed to.

Non-farm payrolls is the big story, domestically, this morning. On the surface a healthy report, the US economy added 206,000 jobs last month – but several underlying figures show continuing cracks in the labor market. May’s blowout reading of 272,000 was sharply revised downward to the tune of nearly 60 thousand jobs, and the unemployment reading ticked up to 4.1% from last month’s 4.0%. Such a reading does trigger the ‘Sahm Rule,’ which economists take as a warning sign of recession.

Named after former Federal Reserve official Claudia Sahm, the rule states that if the 3-month unemployment rate rises more than 0.5%, there may be a recession on the horizon. While not necessarily something to be taken as law, it is one in a series of indicators that the macroeconomic picture in the US is substantially softer than it was even at the start of this year. Warning signs continue to abound, and the Fed has long stated that its mandate in the current economic landscape is to manage inflation without substantially hurting the labor market. At the time of writing, while the Fed’s own dot plot only prices in one interest rate cut this calendar year, markets believe there will be two 25 basis point cuts.

Outside of employment figures, trading is relatively thin today as many offices remain closed in the US after the Independence Day holiday yesterday. The economic calendar heats back up again next week, with CPI figures due out next Thursday.


What to Watch Today…

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Pound Sterling is leading the G10 board this morning on the heels of a snap election that saw Keir Starmer’s Labour party win in a complete landslide. Drawing Labour’s largest margin of victory since 1997, the Conservative shellacking was so total that Nigel Farage’s Reform UK party even won more seats than Rishi Sunak’s Tories. GBP has remained fairly steady since Sunak called the snap election last month, and it appears markets are more excited about the prospect of steady leadership for the first time in several years than anything else. The UK has, of late, become the darling of investors around the world, and GBP is reaping the benefits.


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