Markets Eyeing US Nonfarm Payrolls Report
Today, market participants brace themselves for the much-awaited report of this week, the US nonfarm payrolls report for June, also known as the barometer of US economic health, which is expected to create massive volatility across global financial markets. The report garners a lot of significance particularly after posting dismal figures in the previous month.
In the UK, the just released data showed that trade deficit widened in May. Meanwhile, in the Eurozone, German exports plummeted in May, which in turn narrowed the nation’s trade surplus figure. Also, French industrial output declined in May.
Pound Sterling – UK Markets
The Pound is trading higher against the US Dollar and the shared currency this morning. The just out data showed that UK’s trade deficit widened in May from April. Looking ahead, the Bank of England’s (BoE) interest rate decision and quarterly bulletin report will command the maximum market interest next week. The UK’s BRC retail sales monitor and RICS house price balance data for June are also up for release next week.
Yesterday, Sterling continued to languish near 31-year lows against the greenback. On the data front, London-based reputed think tank NIESR estimated that UK’s GDP grew by 0.6% in the three months to June. However, this figure conceals a disappointing within-quarter pattern, as strong growth in April masked declines in May and June. Further, a special post-referendum survey showed that British consumer confidence suffered its steepest fall in more than two decades. Separately, IMF Chief, Christine Lagarde, urged the UK government to quickly separate from the EU in order to reduce economic uncertainty.
US Dollar – US Markets
The US Dollar has erased its previous session gains and is trading lower against its major peers this morning. Today, market participants will turn their attention towards the critical US nonfarm payrolls report for June, which is expected to post a rebound following the return of almost 35,000 Verizon workers back into the nation’s workforce after a month-long strike in May. However, investors remain wary given the shocking payrolls report in May which recorded its lowest monthly increase in nearly six years. Meanwhile, the nation’s unemployment rate is anticipated to tick up to 4.8% in June.
Yesterday, the greenback ended higher against most major currencies after investors digested a batch of positive economic reports from the US. A report by the payroll processor ADP showed that private payrolls surpassed expectations in June, as small businesses ramped up hiring. Moreover, weekly claims for unemployment benefits dropped last week.
Euro – European Markets
The shared currency is trading mixed against its major peers this morning. Data released earlier in the session showed that German trade surplus narrowed in May, as exports unexpectedly declined and recorded the steepest monthly drop in nine months while imports rose less than expected. The latest data, taken together with this week’s disappointing German industrial production and factory orders data, confirms that the Eurozone’s largest economy lost momentum in the second quarter after witnessing a strong start to this year. Meanwhile, French industrial output fell in May, led by weaker output in the electricity, refining and transport sectors. Separately, in the wake of the Brexit fallout, ratings agency Moody's downgraded the Eurozone’s growth forecasts for this year.
Yesterday the Euro ended lower against the US Dollar after a couple of robust US job market reports strengthened the greenback across the board. Moreover, the European Central Bank's June meeting minutes indicated that the Brexit impact could be “significant” and will have negative spillover effects on the Eurozone economy.
Other Currencies – Highlights
The Japanese Yen is trading higher for the fourth consecutive session against the US Dollar this morning. Earlier in the session, data showed that Japan’s current index of Eco Watchers Survey surprisingly dropped to over a three-year low level in June. Meanwhile, the outlook index fell more than expected in June. Additionally, the nation’s labour cash earnings unexpectedly dropped in May, marking its first decline in eleven months.
In other economic news, Japan’s current account surplus narrowed in May for the first time in almost two years. Further, the preliminary reading of Japan's leading index which signals future economic activity held steady, whereas the coincident index that reflects the nation’s current economic activity fell in May. Separately, the Bank of Japan Governor, Haruhiko Kuroda, expressed confidence in Japan’s recovery prospects and reiterated that the central bank would not hesitate to expand stimulus in order to achieve the 2.0% inflation target. Looking ahead, the US nonfarm payrolls report for June will have a significant impact on the US Dollar - Japanese Yen currency pair.