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EUR / USD

 

The Euro came under renewed selling pressure after Friday’s New York open with the market again attempting to push the Euro towards parity against the dollar. The single currency dipped to fresh 19-year lows just below 1.0075 amid a lack of confidence in the Euro-Zone outlook before steadying into the New York open.

US non-farm payrolls increased 372,000 for June after a revised 384,000 increase the previous month and above consensus forecasts of a 265,000 increase. All sectors recorded an increase in jobs on the month with a 29,000 gain for manufacturing and rebound in retail jobs. There was an increase in private-sector jobs of 381,000 private-sector jobs while government jobs edged lower on the month.

The unemployment rate held at 3.6% and there was a small decline in the participation rate as the labour-force survey recorded a decline of 315,000 in the number employed. The monthly increase in average earnings met expectations at 0.3% with the annual increase at 5.1% from 5.3%.

The data signalled that the labour market was still strong, although the household survey will spark some reservations over trends and wage inflation has cooled slightly.

The debate between a 50 or 75 basis-point rate hike for July remained open which maintained an important element of uncertainty.

The dollar overall edged lower following the jobs data with an element of Euro short covering as sellers looked to take a short-term breather. In this environment, the Euro secured a tentative net gain to 1.0185. Underlying Euro sentiment remained weak and it retreated to below 1.0150 on Monday as the dollar posted net gains.

 

JPY

 

Japan confirmed that former President Abe had been assassinated in Friday’s gun attack, but the yen was unable to gain further support during the European session.

Atlanta Fed President Bostic stated that the economy is starting to slow and that is what is needed. He did, however, add that the labour market still has a lot of momentum and that he was supportive of a 75 basis-point rate hike at the July meeting.

New York Fed President Williams stated that the central bank must be resolute on inflation and cannot fall short. He added that there should be a debate between a 50 or 75 basis-point rate hike in July and he expects rates should be at 3.0-3.50% at year-end.

US bond yields moved higher after the US jobs data and the 10-year yield increased to highs near 3.10% at the European close. Higher yields underpinned the dollar with a peak just above 136.50 before a retreat to around 136.15 at the European close amid a slightly weaker US dollar tone.

There were further reservations over Chinese coronavirus trends on Monday amid reports that the new Omicron variants had been detected. US equities also posted losses, but the yen was unable to gain defensive support with the dollar surging to a fresh 23-year high at 137.25 before a corrective retreat to 137.00.

 

GBP

 

There was a steadier Sterling tone during Friday as the immediate political hysteria calmed to some extent with markets waiting for further evidence on potential front runners in the Conservative Party leadership race. A calmer tone surrounding risk appetite also provided some support, although underlying reservations over the UK and global economy continued to sap underlying support, especially given important reservations over the UK trade position.

Sterling dipped to lows at 1.1920 in early Europe as the dollar strengthened, but there was a recovery to above 1.2000 as the US currency retreated again.

The UK currency settled around 1.2030 against the US currency t Friday’s close and the Euro settled little changed with slight gains to the 0.8460 area.

Conservative Party candidates tended to focus on the potential for tax cuts which will maintain expectations of a looser fiscal policy and also bolster expectations that the Bank of England will adopt a more restrictive monetary policy stance. Weaker risk conditions hampered Sterling gains on Monday as it traded below 1.2000 against the dollar while the Euro edged higher. Markets will be alert for comments from Bank of England officials with Conservative candidates campaign pledges also significant.

 

CHF

 

The Swiss franc lost ground on Friday with immediate demand for the currency curbed by a stronger tone surrounding risk appetite as overall demand for defensive assets faded slightly. The Euro strengthened to around 0.9950 while the dollar posted highs near 0.9800 before a limited correction.  

Data on Swiss sight deposits will be monitored to assess whether there are any protests against franc strength with any bank rhetoric also watched closely.

The Euro was unable to make further headway on Monday while the dollar traded around 0.9795 amid the firm overall US tone.

 

Technical Levels

Contents

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