After a string of poor housing, manufacturing and consumer spending data, the U.S ended the week on an even more disappointing note as the U.S Bureau of Labor statistics announced that the world’s largest economy lost more than expected jobs in June. Friday’s Non-Farm Payroll showed an unexpected drop of 125,000, the largest decline since October, as over 225,000 government census workers were laid off. Typically, a fall in the NFP would indicate a rise in the employment rate; however, this was not the case as the jobless rate fell for the first time this year to 9.5% from 9.7%. Meanwhile, employment in the private sector rose by 83,000, falling short of the predicted gain of 110,000 but an improvement over the two previous months’ figures.
The Dollar lost all semblance of a “safe haven” currency as the previous market correlation of “increased risk equals a strong dollar” was nowhere to be found. As a result, Forex investors are beginning to doubt that the Federal Reserve will raise the interest rate this year. Moreover, the debt issues that have plagued the both the EU and the UK this year seem set to re-emerge in the US.
The Euro tumbled down from its highest level in nearly six weeks against the greenback as speculations increased that the European Central Bank will hold the key interest rate at its current record low level of 1%. The single European currency dropped to $1.2543, down 0.2% from $1.2566 on July 2nd, when it touched on a high of $1.2612, the most since May 21.
According to analysts, the ECB will opt to hold interest rates unchanged at this Thursday’s policy meeting as the Euro Zone nations’ attempt to reduce their budget deficits which continue to hamper the economic growth of the region.
The Sterling’s momentum continued last week as the GBPUSD traded above the 1.500 mark for most of the week. Like the Euro, the Pound has gained from negative US news which has led the decline in positive Dollar sentiments.
With relatively little US data this week, Forex investors will be watching key UK economic news releases. Headlining the week is Thursday’s Bank of England MPC Meeting; however the Manufacturing Production data, which is to be released a few hours earlier, may result in an even bigger movement in the British currency. The manufacturing sector has outperformed forecasts during the UK’s economic recovery; thus, its releases are of great importance to forex investors.
In today’s news the Services PMI, although not as important as the corresponding manufacturing figure, could have an impact on the Sterling. While a better than expected release could maintain the GBP/USD upward trend, a worse than expected figure might put the pair’s recent rise to rest.
Written by Finexo.com