EUR / USD
US non-farm payrolls increased 209,000 for June, below consensus forecasts of around 225,000 and followed a revised 306,000 increase the previous month.
Manufacturing jobs increased 7,000 on the month with a 23,000 increase in construction jobs. There were monthly declines in retail, transport and temporary help jobs while government jobs posted a strong 60,000 increase.
According to the household survey, the unemployment rate edged lower to 3.6% from 3.7% and in line with market expectations. The participation rate was unchanged on the month with a reported 273,000 increase in the number of employed.
Average hourly earnings increased 0.4% for the month, slightly above expectations of 0.3%, with a year-on-year increase of 4.4%, unchanged from the previous month.
The Euro jumped higher after the data, especially as markets were braced for a stronger headline figure following the ADP data on Thursday.
The Euro corrected lower, but then gained fresh traction later in the session and tested 1.0950 ahead of the European close with 10-day highs around 1.0970.
In comments over the weekend, ECB council member Villeroy stated that he expects interest rates to peak soon and plateau for a long time.
The Euro was unable to make any further headway on Monday amid fragile risk conditions and traded close to the 1.0950 level.
The dollar was unable to make any headway ahead of Friday’s US jobs data with the yen gaining some traction on the crosses. Treasuries posted sharp gains after the US data with yields moving lower and the US currency dipped further to initial lows around 142.60. Although there was a slight recovery, selling resumed into the European close with the dollar holding just above the 142.00 level.
There were still very strong expectations that the Federal Reserve would hike interest rates by a further 25 basis points to 5.50% at the July policy meeting, but there was fresh uncertainty surrounding the medium-term outlook following mixed data.
Chicago Fed President Goolsbee stated that inflation is down somewhat, but needs to come down more. He added that it was still possible to have one or two more rate hikes this year. Markets will continue to monitor comments from Federal Reserve speakers closely.
Chinese inflation data was weaker than expected with consumer prices unchanged on the year while producer prices declined 5.4% compared with expectations of a 5.0% fall. Risk appetite remained fragile and after a strong rebound to the 143.00 area as yield spreads undermined the yen, there was a retreat to around 142.65.
Sterling was able to hold a firm tone after Friday’s European open with high domestic yields continuing to underpin the UK currency.
UK yields declined only slightly during the day while US yields declined more substantially following the jobs data.
Bank of England monetary policy committee Mann stated that there is evidence of inflation becoming embedded in the economy and that it is taking longer to decline than it did to rise. She reiterated that it is better to frontload rate hikes in a backdrop of inflation uncertainty.
There were renewed gains after the US jobs data with an attack on the 1.2850 area against the dollar and the currency posted a marginal 14-month high towards the European close. Sterling also held firm against the Euro as the single currency retreated to around 0.8535. Sterling was unable to make further headway on Monday and held just above the 1.2800 level against the dollar with a net Euro recovery to 0.8550.
Comments from Bank of England Governor Bailey will be monitored closely on Monday for any comments on the outlook for interest rates.
The Swiss currency maintained a firm underlying tone on Friday with lower global yields and fragile equity markets continuing to underpin the Swiss franc. The Euro dipped to lows around 0.9735 with the dollar sliding to below the 0.8900 level.
Swiss National Bank member Schlegel stated that the central bank is still open to a further rate hike despite the latest dip in the inflation rate.
The franc lost some ground on Monday with the dollar recovering to just above the 0.8900 level.