YB Currency Update – Friday 3rd July

YB Currency Update – Friday 3rd July

The US heads into their independence day long weekend today weighed down by a rise in the unemployment rate to 9.5%, and a higher rate of job losses than in the past few months. The expectations were for 345k less jobs in the US than last month, but the non-farm payrolls actually fell by 467k, up near the 500k mark, back were to the pace in the first quarter of the year. Average hourly earnings stayed flat, while the weekly wage went down, indicating not only less jobs, but those in jobs working less also. The poor data caused drops in stock markets, the FTSE dropped 2.5%, the S&P500 was down 2.9%, while the DAX dropped 3.8%. The markets were already shaky from some poor Eurozone data out overnight, but the payrolls continued the move, taking the Pound down below 1.6350, the Euro fell below 1.40, while the Australian Dollar slipped back below 0.8 against the US currency.

The US  non farm payrolls were actually the 2nd dose of employment figures out yesterday, with the Eurozone figures providing the first disappointment has they also rose up to 9.5%, while Eurozone PPI also falling. The ECB helped matters little deciding to keep interest rates on hold at 1%, and indicating that rates are not going to move anytime soon, describing the current rate climate as appropriate, this is in spite of Eurozone inflation falling below 0%.  

The Euro has actually suffered much less than the Pound in spite of the weak data, the Pound has been hit by the further concerns over how the government plan to fund their rather worryingly large deficit, and the childish squabbling over 'Tory cuts', and 'Labour spending' provides absolutely no answers. The OECD have raised concerns over UK funding, and the nationalisation of the east coast railway adds further pressure to the government's bottom line. The Pound did take a large hit yesterday, falling below 1.16 briefly, very close to an important technical level, however it has bounced back to sit just under 1.17, and seems to be well supported at these levels, for now.                                               

With the US taking the day off, what data is out today is all from this side of the Atlantic. We have the PMI for services, which is expected to show a small fall in the UK as well as the Eurozone, but with little information and trading relatively quiet this afternoon, markets are likely to trade sideways, but with liquidity tight a large data shock could cause some movement.

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