Greenback strengthens as US jobs report bounces back…
Last Friday saw the US dollar recapture recently lost ground against many of its major peers. In the pound’s case we even saw recent support at $1.25 break to open up another potential test of the yearly lows.
In the month of June the US economy added a whopping 224,000 jobs to the economy. Wage growth softened as did the unemployment rate, edging up to 3.7% from 3.6%. This report will go far in reducing concern the Federal Reserve had about the economy. No doubt there are areas of weakness but the labour market clearly remains buoyant. Calls for the Fed to lower rates by 50bps at their next meeting should now have been put to bed following the jobs report. It’s now whether the Fed believe there is enough underlying weakness in other parts of the economy to warrant a 0.25bps cut. For now the FX market will continue to do what it’s done best over the last few years – buy dollars! The greenback should have a new lease of life as participants continue to debate over the health of the US economy. The GBPUSD level to keep an eye on is the January flash crash low at $1.2430.
This week has a few highlights to monitor – Fed chair Powell will be testifying for 2 days on Capitol Hill. In addition, US consumer price index data will be closely watched to see whether the Fed are justified in their recent dovish bias. From the UK, The Tory leadership race and Brexit will take centre stage. There’ll also be manufacturing and industrial output numbers released on Wednesday.
Written by Viv Savani. 8:51am, July 8th 2019
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