Improving Labour Market Boosts US Dollar

Buoyant nonfarm payrolls report further increased the appeal for greenback in Friday’s trading session. The evident improvement in the job market has strengthened the belief that the Fed is poised to unwind a part of its stimulus later this year. In this context, the FOMC minutes and the US Fed Chief’s comments due midweek would hold market interest. Meanwhile, in today’s session, the Euro-area’s finance ministers’ meeting and the ECB President’s comments before the European Parliament would be closely watched for gauging the future course of fiscal and monetary policy stance in Europe. At home, industrial and trade balance data as well as NEISR estimates due tomorrow will grab focus for further evidence of the UK growth gaining momentum.

Pound Sterling – UK Markets

Although a slew of key economic indicators released last week suggested that the UK economic recovery remains on track, the Pound retreated and nudged below the 1.49 mark against the US Dollar in today’s trading session after robust US jobs data on Friday heightened fears of the US Fed scaling back its massive stimulus measures. On account of light trading today, global cues will be tracked for direction to risk appetite. In tomorrow’s session, industrial production data remains a key event on the radar and with the data expected to reveal an improvement for May, it remains to be seen whether the Pound is able to regain its footing against the greenback. Markets are also expected to set their sights on the NEISR GDP estimates due tomorrow for early insights into the nation’s second quarter performance. RICS house price data and BRC retail sales due overnight feature among the other macro releases that are expected to shed light into the nation’s recovery in the retail and housing sectors. With a quiet week ahead in terms of macro releases, events unfolding across the Atlantic are likely to act as key trend setters for Sterling during this weekly session.

US Dollar – US Markets

On Friday, the crucial US nonfarm payrolls report startled market participants on the upside, leading the US Dollar to further strengthen against its major peers. Although the pace of hiring remained fairly strong, the unemployment rate remained unchanged at 7.6% for June. With labour market recovery being the focal point of the US Fed’s massive stimulus measures, better than expected employment report has heightened prospects of the Fed withdrawing a part of its monetary stimulus in the near future. For further clues about the Fed’s stance, FOMC minutes and the Fed Chief Ben Bernanke’s speech due on Wednesday would grab market focus. The USD is trading mixed against major currencies in today’s morning session. Meanwhile, with the labour market gaining momentum and US consumer confidence climbing to multi-year highs, traders are expected to shift their attention to the consumer credit data scheduled for release later today for further hints into the nation’s recovery. NFIB’s small business optimism index, Michigan consumer confidence report for July and initial jobless claims figures remain the other key releases scheduled during the weekly session.

Euro – European Markets

“Risk off” sentiment following buoyant US nonfarm payrolls report led the single currency to nudge below the 1.29 mark against the greenback in Friday’s trading session. Meanwhile, data indicated that monthly factory orders in Germany unexpectedly declined while the trade surplus narrowed more than anticipated for May, thereby casting off optimism that the Euro region’s largest economy is gaining momentum. With German industrial production expected to echo similar results, the upside for the Euro seems limited in today’s session. Meanwhile, Sentix investor confidence data just out unexpectedly deteriorated for July. Meanwhile, in a bid to avert a potential crisis, Portugal's Prime minister appointed Paulo Portas, who resigned last week as Foreign Minister, as his deputy. With the Euro zone outlook mired with uncertainty, traders remain all ears to the Mario Draghi’s comments due later today to decipher how the central bank’s plans to tackle the growing economic woes. Market players are also expected to keep a tab on the Euro group finance ministers meeting today in Brussels wherein a decision on Greece’s next bailout tranche would be reached.

Other Currencies – Highlights

The Canadian Dollar sharply backtracked against its US counterpart in Friday’s trading session after better than expected US employment data reinforced the widely held belief that the US Fed would scale back its ultra loose monetary policy stance sooner than anticipated. Meanwhile, domestic releases on Friday offered a mixed picture of the Canadian economy. Although the nation registered a steady recovery in the labour market for June, data revealed that monthly manufacturing activity expanded at a much weaker than expected pace for June. In today’s session, the Loonie is trading in a tight range against the greenback amid a lack of triggers to risk appetite. Meanwhile, building permits, Bank of Canada’s senior loan officer survey as well as business outlook future sales due later today will be gauged for decoding the near term demand in the Canadian Dollar. Apart from domestic data, traders are also expected to keep a track on news flows emanating from global markets for further direction to currency markets.