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    Dollar weakens after release of under-par employment data

    USD

    The dollar slipped lower on Thursday after the release of slightly disappointing jobs data appeared to confirm fears the jobs market had still not fully healed.

    Change in Non-Farm-Payrolls in June undershot expectations of 233k by coming out at only 225k.

    In addition the previous month’s result was revised down from 280k to 254k. April was also revised down resulting in a total negative revision of 60k over the two previous months.

    An unexpected slow-down in Average Hourly Wages, which failed to rise from the previous months 24.95/hr, and slowed to only a 2.0% increase yoy, from a 2.3% previously, also weighed on the greenback as it is seen as a key indicator by the Fed as to whether the economy is ready for an interest rate hike.

    Whilst the fall in the Unemployment Rate to 5.3% from 5.5% was initially viewed as a very positive sign, much of the increase was put down to a 0.2% drop in the participation rate, which measures the number of people seeking employment, and this fall was thought of as a very bad sign as a drop can be a sign of jobseekers dropping out of searching for work, perhaps due to futility.

    Other data showed a deeper-than-expected contraction in Factory Orders but a healthy rise in ISM for the New York area.

    EUR

    The euro rose on Thursday after the results of a GPO survey in Greece showed the number of respondents who would vote “Yes” in the referendum now outstripped the number who would vote “No”, leading to increased expectations the Greek people might decide to accept creditor demands even if their leaders were against them.

    The survey showed 47% said they would vote for a deal versus 43% who would not. In previous polls the number of people saying they would vote “No” had always comfortably outstripped the “Yes” camp, however, this changed significantly after the closure of banks, which seemed to have shifted more in favour of a quick deal.

    There is also a possibility voters now fear Greece being pushed out of the E.U and left isolated, after representatives of the Troika said a win for the NO vote would lead to the ejection of the country from the euro and probably the E.U too. Although the Prime Minsiter Alexis Tsipras has railed against these as blackmailing tactics to get more Yes votes, they seem to have worked.

    On Thursday the Greek Finance Minsiter Yannis Varoufakis said he would resign from the cabinet if the Yes camp won as he would not want to be associated with signing an agreement which he believes is fundamentally flawed.

    On the data front it was a quiet day, with Producer Prices coming out marginally lower than expected in May, at 0.0% on a month-on-month basis when it had been expected to rise to 0.1% from -0.1% previously. Year-on-year it came out at -2.0% as forecast.

    GBP

    The pound rose on Thursday after Construction PMI showed a higher-than-forecast rise in June.

    Data provider Markit’s gauge of construction activity increased substantially to 58.1 from 55.9 previously, when it had been estimated to rise to only 56.5.

    The dollar faltered against sterling after U.S jobs data disappointed and Grexit risk continued to weigh on the euro, despite a survey showing a majority of Greeks would vote “Yes” in the referendum, signalling the possibility of a deal being done with creditors as soon as next week.

    U.S data failed to show growth in Avg Hourly Earnings from the previous month, and yearly growth slowed from 2.3% to 2.0%. This stood in contrast to U.K Avg Weekly Earnings which beat expectations in recent data, rising to 2.9%. The divergence continues to support the pound against the dollar as it indicates the BOE may increase rates earlier than previously thought.

    On the data front Housing data from Nationwide showed house prices falling -0.2% mom, which was below the 0.5% expected. Year-on-year, they rose 3.3% from 4.6% when they had been estimated to drop to 4.5% by the lender.

    JPY

    The yen remained within a tight trading range on Thursday trading at 123.15 per dollar in the second half of the New York session, as traders backed off safe haven moves.

    Following the release of Tankan data yesterday Hiroaki Muto of Sumitome Asset Management said “The Tankan shows more monetary easing is not necessary because there really isn’t anything bad in this data”.

    Additional Tankan data showed big Japanese companies plan to increase capital expenditure at the fastest pace in a decade and expect that capex for the 2015-16 fiscal year will surge 9.3% compared with economist’s predictions of 5.2% growth. If companies do in fact increase capital expenditure at the expected pace, it will be the biggest rise since fiscal year 2016, the BOJ said.

    However small companies expect Capex to decline 15.7% over the same period although that came in better than forecast for a 16.3% plunge.

    In addition the mood among big service-sector firms, improved by 4 points to plus 23, beating market predictions and rising for three straight quarters to reach a level last seen in 2014.

    USD

    The dollar slipped lower on Thursday after the release of slightly disappointing jobs data appeared to confirm fears the jobs market had still not fully healed.

    Change in Non-Farm-Payrolls in June undershot expectations of 233k by coming out at only 225k.

    In addition the previous month’s result was revised down from 280k to 254k. April was also revised down resulting in a total negative revision of 60k over the two previous months.

    An unexpected slow-down in Average Hourly Wages, which failed to rise from the previous months 24.95/hr, and slowed to only a 2.0% increase yoy, from a 2.3% previously, also weighed on the greenback as it is seen as a key indicator by the Fed as to whether the economy is ready for an interest rate hike.

    Whilst the fall in the Unemployment Rate to 5.3% from 5.5% was initially viewed as a very positive sign, much of the increase was put down to a 0.2% drop in the participation rate, which measures the number of people seeking employment, and this fall was thought of as a very bad sign as a drop can be a sign of jobseekers dropping out of searching for work, perhaps due to futility.

    Other data showed a deeper-than-expected contraction in Factory Orders but a healthy rise in ISM for the New York area.

    EUR

    The euro rose on Thursday after the results of a GPO survey in Greece showed the number of respondents who would vote “Yes” in the referendum now outstripped the number who would vote “No”, leading to increased expectations the Greek people might decide to accept creditor demands even if their leaders were against them.

    The survey showed 47% said they would vote for a deal versus 43% who would not. In previous polls the number of people saying they would vote “No” had always comfortably outstripped the “Yes” camp, however, this changed significantly after the closure of banks, which seemed to have shifted more in favour of a quick deal.

    There is also a possibility voters now fear Greece being pushed out of the E.U and left isolated, after representatives of the Troika said a win for the NO vote would lead to the ejection of the country from the euro and probably the E.U too. Although the Prime Minsiter Alexis Tsipras has railed against these as blackmailing tactics to get more Yes votes, they seem to have worked.

    On Thursday the Greek Finance Minsiter Yannis Varoufakis said he would resign from the cabinet if the Yes camp won as he would not want to be associated with signing an agreement which he believes is fundamentally flawed.

    On the data front it was a quiet day, with Producer Prices coming out marginally lower than expected in May, at 0.0% on a month-on-month basis when it had been expected to rise to 0.1% from -0.1% previously. Year-on-year it came out at -2.0% as forecast.

    GBP

    The pound rose on Thursday after Construction PMI showed a higher-than-forecast rise in June.

    Data provider Markit’s gauge of construction activity increased substantially to 58.1 from 55.9 previously, when it had been estimated to rise to only 56.5.

    The dollar faltered against sterling after U.S jobs data disappointed and Grexit risk continued to weigh on the euro, despite a survey showing a majority of Greeks would vote “Yes” in the referendum, signalling the possibility of a deal being done with creditors as soon as next week.

    U.S data failed to show growth in Avg Hourly Earnings from the previous month, and yearly growth slowed from 2.3% to 2.0%. This stood in contrast to U.K Avg Weekly Earnings which beat expectations in recent data, rising to 2.9%. The divergence continues to support the pound against the dollar as it indicates the BOE may increase rates earlier than previously thought.

    On the data front Housing data from Nationwide showed house prices falling -0.2% mom, which was below the 0.5% expected. Year-on-year, they rose 3.3% from 4.6% when they had been estimated to drop to 4.5% by the lender.

    JPY

    The yen remained within a tight trading range on Thursday trading at 123.15 per dollar in the second half of the New York session, as traders backed off safe haven moves.

    Following the release of Tankan data yesterday Hiroaki Muto of Sumitome Asset Management said “The Tankan shows more monetary easing is not necessary because there really isn’t anything bad in this data”.

    Additional Tankan data showed big Japanese companies plan to increase capital expenditure at the fastest pace in a decade and expect that capex for the 2015-16 fiscal year will surge 9.3% compared with economist’s predictions of 5.2% growth. If companies do in fact increase capital expenditure at the expected pace, it will be the biggest rise since fiscal year 2016, the BOJ said.

    However small companies expect Capex to decline 15.7% over the same period although that came in better than forecast for a 16.3% plunge.

    In addition the mood among big service-sector firms, improved by 4 points to plus 23, beating market predictions and rising for three straight quarters to reach a level last seen in 2014.


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