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US July non-farm payrolls increased 1.76mn for July following a revised 4.79mn increase previously and slightly above consensus forecasts of 1.60mn. The increase in manufacturing jobs was much lower than expected at 26,000 while there were strong gains in leisure, retail and government jobs. The unemployment rate declined to 10.2% from 11.1% and below expectations of 10.5%, although there were still concerns over structural unemployment and workers excluded from the jobless total.

Average hourly earnings increased 4.8% in the year to July from 4.9% previously as unemployment remained skewed towards lower-paid workers.

The data provided an element of relief over US trends, but there were important reservations over the outlook, especially given uncertainty over coronavirus trends and the continuation of employment support measures with the risk of a weaker trend during the autumn.

There was choppy trading following the data with the dollar gains initially faltering, but the US currency gained further traction later in the US session. Markets remained uneasy over the threat of a sharp dollar correction given the evidence of over-extended short positions and the data was used as justifying the dollar correction. Commodity currencies and precious metals also corrected lower which underpinned the US currency.

The Euro was also subjected to a limited correction and retreated to lows near 1.1750 before stabilising around 1.1780. CFTC data recorded a further surge in long Euro positions to a record high at 180,000 contracts. This extreme position will maintain the potential for a sharp Euro correction, although there will be scope for potential longer-term inflows on stronger sentiment. The dollar was unable to extend the recovery on Monday with the Euro just below 1.1800.


The dollar strengthened after the US employment data, but there was selling interest above 106.00 with a close just below this level as markets monitored fiscal developments. Talks between White House officials, congressional Democrats and Republicans continued, but negotiations broke up with no agreement late on Friday. In response, President Trump took executive action to restore some unemployment benefits on a temporary basis and suspend the payroll tax. There were also orders to block potential housing evictions. Treasury Secretary Mnuchin and House Speaker Pelosi stated that they were willing to resume talks on areas of agreement as uncertainty remained extremely high. Chicago Fed President Evans stated that it was vitally important to implement another support package and wants more action to protect small businesses and vulnerable communities.

The overall market reaction was limited with US equity futures edging higher in Asia on Monday while regional markets were mixed amid a Japanese holiday. Equity markets were also monitoring US-China tensions closely. In particular, there were concerns that the tensions would have a negative impact on bilateral trade talks which are scheduled for the end of this week. Overall, the dollar edged lower to the 105.75 area as narrow ranges prevailed with the Euro below 125.0.


The Halifax house-price index increased 1.6% for July following a 0.1% decline the previous month with the year-on-year increase at 3.8% from 2.5% previously. There was further evidence of a short-term boost for the housing sector, but longer-term doubts persisted. There was choppy trading following the US jobs data with the currency dipping to near 1.3000 against the dollar before closing around 1.3050 while the Euro was little changed around 0.9030.

CFTC data recorded a decline in short Sterling positions to 15,000 from 25,000 the previous week, which suggested a slightly less negative stance from hedge funds while overall data suggests that options markets are not seeing net UK currency selling despite underlying negative sentiment.

There are still underlying concerns over the UK labour market amid fears over increased redundancies and Tuesday’s labour-market data will be watched closely. The UK currency edged higher on Monday as risk appetite held firm and traded around 1.3070 against the dollar with the Euro around 0.9025.


The Euro was unable to hold above the 1.0800 level on Friday and retreated to near 1.0750 amid a wider correction for the single currency. The dollar was able to make only limited gains with selling interest near 0.9150. There were further underlying concerns over the risks of medium-term currency debasement as central banks pursue extremely supportive monetary policies which continued to provide underlying support for the Swiss currency. The franc edged lower on Monday with the dollar around 0.9130 as equity markets held steady. Swiss seasonally-adjusted unemployment held steady at 3.3% and below expectations of 3.6%.



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