July was a painful month for the US dollar. It surrendered 6% against the euro, 5% against the pound, and 4% against the Swiss franc. The GBPUSD pair is currently on its 11th consecutive day of gains, a record that stretches back over a decade. The main question plaguing investors is whether the buck can bounce back.
A key input to whether a fightback is likely from the beleaguered US asset is economic data. This week sees 2 significant US-centered data points which could certainly swing things in favour of the dollar. Both reports are in the area of employment and should provide solid insight into just how well the US recovery is progressing. First and foremost, US non-farm payrolls will be what the majority of market participants focus on this week. Expectations are for job growth to have slowed from June. The consensus is for 1.5 million jobs to have been added to the economy in July, down from 4+ million in June. Secondly, initial jobless claims on Thursday will be a good indicator of the current level of job losses across the US.
Domestically, the Bank of England will provide a policy announcement on Thursday. The Bank is not expected to change policy in any material way after it added £100 billion to its asset purchase program in June. Andrew Bailey will likely be faced with discussing the prospect of negative interest rates, something the UK central bank did not seem overly opposed when previously speaking about the topic.
Additionally, this week sees official July PMIs from across the globe. The Reserve Bank of Australia will announce a monetary policy decision and we’ll also have US congress debating over a fresh round of stimulus.
Written by Viv Savani. 8:34am, August 3rd 2020
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