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    Dollar falls after June jobs data fails to impress

    The dollar went into reverse to give up earlier gains after June’s jobs data disappointed. The all-important change in nonfarm payrolls for June came in at 223,000 against expectations of 233,000.  The previous month’s figure was revised lower from 280,000 to 254,000, which contributed to the shift in outlook of a more moderate recovery in the jobs market than anticipated.

    The unemployment rate was the only positive component of the jobs data as it fell to 5.3% from 5.5%, against estimates that it would fall to 5.4%. However, the fall was due to a decline in the labor participation rate, which dropped to 62.6% from 62.9%, as the labor force shrank by 432,000.

    The average hourly earnings figures also surprised expectations as the month-on-month change showed earnings were unchanged from the previous month, against estimates that they would rise by 0.2%. The annual rate fell from 2.3% in May to 2.0% in June, versus expectations that it would stay unchanged.

    The weaker-than-expected initial jobless claims numbers for week ending June 27 showed that the softening trend in the jobs market continued at the end of June. Initial jobless claims rose to 281,000 against estimates of 270,000.

    The dollar tumbled on the back of the data as the greenback remains highly sensitive to the jobs data as the Fed would be keeping a close eye on the pace of the tightening labor market. With pay growth still looking muted though, it is uncertain whether it would pick up enough over the summer to warrant a rate rise in September, as most economists now expect.

    After a brief attempt to bounce back, the dollar headed lower again on weaker-than-expected factory orders which declined by 1% in May, versus forecast of a 0.5% fall. The greenback fell sharply against the yen to 123.02 and the Canadian dollar to 1.2569. Its declines against the euro and the pound were a bit more limited as the euro rose to 1.1092 and sterling rose to 1.5612.

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