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    European Session – US non-farm payrolls weaken dollar, Swedish krona tumbles on rate cut

    The European Session was mostly calm until the release of the US non-farm payrolls report when US markets opened. With Greece put aside for today, markets focused on economic data which were the main catalyst for currency moves.

    One of the biggest movers in the European currencies today was the Swedish Krona which fell to a 1-month low against the euro following a rate cut by Sweden’s central bank. The Riksbank unexpectedly cut its benchmark rate by 10 basis points to bring the rate down to -0.350%. The euro bounced from 9.2280 to 9.3662 krona.

    Other data today came from the UK where the construction PMI for June grew at the fastest rate in four months to print a reading of 58.1 compared to 55.9 in May. The pound rose on the data to a high of 1.5622. After the US jobs data it fluctuated between 1.5561 and 1.5639 before steadying around 1.5600.

    While Greek risk remains elevated, focus shifted temporarily away from Greece to the all-important US non-farm payroll report especially since Eurozone finance ministers have ruled out any further talks until Sunday’s referendum. So the highlight of the day was the US jobs data which disappointed the markets and caused the dollar to fall.

    Job creation cooled slightly in June as US employers added fewer jobs compared to May. According to the US Labor Department, non-farm payrolls rose a seasonally adjusted 223,000 in June versus an estimate of at least 230,000. Meanwhile, May’s 280,000 jump was revised lower to 254,000 jobs. The most disappointing part of the report was the fall in the labor participation rate from 62.9% to 62.6%. Adding to the negative data was the slow pick-up in wage growth. The monthly average of hourly earnings did not increase at all in June and held at $24.95, contradicting forecasts for a rise of 0.2% from May.

    Aside from the non-farm payrolls, initial jobless claims data were also released out of the US. The number of Americans applying for unemployment benefits rose to 281,000 against estimates of 270,000.

    The dollar fell sharply against the yen after the jobs data to 122.96 from a session high of 123.71. 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 is very sensitive to US employment data as the Fed monitors the labor market closely. There are still expectations for a rate hike in September but this would be highly dependent on the data until then.

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