Previous Day's Market Highlights
The dollar rallied on Friday as markets somewhat reduced their bets on Federal Reserve rate cuts after a surprisingly strong nonfarm payrolls number. Data showed the US economy added 224,000 jobs in June - well above even the most optimistic forecasts and a strong bounce back from May's disappointment. The previous 2 months' payrolls figures saw minimal changes, just a modest net downward revision of 11,000, leaving the 3-month payrolls average standing at 171,000. However, despite the strong headline figure, other aspects of the report were softer than expected. Average hourly earnings continued to increase at 3.1% on a year-on-year basis, while unemployment ticked up to 3.7% - though the latter was driven by an increase in the participation rate hence is not a major concern. Overall, despite an upside surprise on the payrolls number, jobs growth is set to moderate in the coming months as the labour supply continues to shrink - a factor emphasised by the 6-month average of jobs gains falling to 172,000, an 18-month low. However, more sluggish jobs growth should result in upward pressure on wages as firms compete to recruit staff. For markets, the strong report saw an unwinding of bets on Federal Reserve rate cuts, helping the dollar gain 0.5%, rising to a near 3-week high against a basket of peers.
Labour market data was also in focus from Canada on Friday. The survey showed jobs gains stalling in June, with employment falling by a net 2,200 compared to an expected 10,000 gain. However, the labour market remains tight with unemployment holding close to record-lows at 5.5%, and average earnings increased at a better than expected 3.6% YoY. On the whole, the labour market remains in good shape, with June's figures likely just a blip after the strongest H1 jobs performance since 2002, giving little cause for concern from the Bank of Canada. On Friday, the Canadian dollar lost around 0.25%, retracing from Thursday's 8-month highs against the dollar.
Elsewhere, other G10 currencies fell victim to the dollar's post-payrolls advance. The euro shed 0.6% against the greenback, while the pound slid a shade under 0.55%. Sterling's decline took cable (GBP/USD) to a fresh 6-month low of $1.2481 before recovering some ground. The pound closed unchanged against the common currency. Friday's worst performer was the kiwi dollar, losing 0.95% and falling to a 1-week low.
Away from FX, good economic news was once again bad news for the equity markets, as the bumper US labour market report dampened hopes of looser Federal Reserve policy. In Europe, the pan-continental Stoxx 600 slipped 0.7%, while the US benchmark S&P 500 lost 0.2%. Finally, oil prices were mixed on Friday, though both WTI and Brent were on track for weekly losses as concerns over demand persist.
|Currency Pairing||08:00 Today||Vs 08:00 Yesterday||Four-Week High||Four-Week Low||% Change|
Today's Market Highlights
A fresh trading week begins with a rather quiet economic calendar, likely resulting in cautious trading as market participants continue to digest Friday's payrolls report ahead of a busy week to come. Today's main release comes from the eurozone, with investor confidence figures due this morning. Data is set to show confidence falling to an index level of 0.2 in July, a modest recovery from last month's 5-month low. However, the reading would continue to reflect relatively lacklustre economic confidence, a factor likely to concern the ECB as the eurozone's outlook remains weak. Other notable releases are limited, though this evening's US consumer credit figures may attract some attention.
Turning to the remainder of the week, Federal Reserve policy will take centre stage, with 3 key points due. Firstly, Fed Chair Powell will be in the spotlight during 2 days of semiannual Congressional testimony on Wednesday and Thursday. Markets will be looking for Powell's view on the current economic outlook, as well as comments on his monetary policy expectations with the testimony coming just 3 weeks before the Fed's next policy decision. Also concerning US monetary policy this week will be minutes
from the June FOMC meeting on Wednesday, in addition to Thursday's CPI inflation figures, expected to show headline CPI falling to a 6-month low of just 1.6% YoY. Other monetary policy highlights this week include the release of minutes from the ECB's June meeting, likely to show deliberation over additional stimulus measures, in addition to the Bank of Canada's (BoC) latest rate decision. Wednesday's policy decision should see the BoC keep policy settings unchanged, while continuing to strike an upbeat tone.
Elsewhere, a number of key economic releases are also due. From the UK, focus will likely fall on monthly GDP figures for May, with the data set to be closely watched for any signs of weakness as the economy heads towards stagnation in Q2. Meanwhile, markets will pay close attention to both trade and inflation numbers from China for any impact of ongoing US-China trade tensions, while also examining industrial production data from Japan and the eurozone.
Today's Economic Calendar
|9:30am||EUR||Sentix Investor Confidence (Jul)||0.2||-3.3|
|8:00pm||USD||Consumer Credit (MoM - May)||16.9bln||17.5bln|