US Dollar firms ahead of this afternoon’s nonfarm payrolls report

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8 July 2016

Matthew Ryan

Senior Market Analyst at Ebury. Providing expert currency analysis so small and mid-sized businesses can effectively navigate international markets.

The US Dollar rose against its major peers on Thursday ahead of this afternoon’s highly anticipated labour report in the US, closely watched by the Federal Reserve when deciding on the path of its monetary policy.

ven prior to Brexit, financial markets had begun pushing back their expectations for the timing of the next rate move by the Fed following last month’s dismal nonfarm payrolls figure. We’re expecting a much healthier number this time around, with any reading north of the 180,000 mark expected to provide good support for the US Dollar today.

On the whole, the currency markets have proved relatively calm in the past couple of days, with investors awaiting a reaction from the major central banks around the world following the Brexit vote.

We now look ahead to next Thursday’s Bank of England monetary policy meeting as the next major event in the currency markets. We think that the central bank will announce a cut in its benchmark interest rate by 25 basis points for the first time in 7 years, and could hint that further quantitative easing is on the way. This presents another significant downside risk for the Pound.

Yesterday we saw a stark warning from the National Institute of Economic and Social Research, which suggested that the UK economy was on course for a marked slowdown in the third quarter of the year. Based on our estimations, we’re now expecting a 1% contraction in UK GDP growth in the third quarter, and another quarter of flat growth in the fourth quarter.

Elsewhere, the Australian Dollar recovered ground yesterday, having tumbled in Asian trading after Standard & Poor downgraded the country’s credit outlook from stable to negative, citing the current impasse in Australian politics.

Special mention also goes to the New Zealand Dollar, which was just about the best performing currency in the world yesterday, rallying in excess of 1%. This followed comments from RBNZ official, Grant Spencer, who warned that further cuts in New Zealand’s interest rate could lead to financial instability.


Sterling was mostly range bound against the US Dollar yesterday, falling by 0.2% over the course of the day.

Thursday morning’s industrial and manufacturing figures for May were better than expected, although did little to affect the Pound given its timing. Industrial production rose by 1.4% year-on-year, while manufacturing grew by 1.7%.

On the political front, the race to be the next Prime Minister took another turn yesterday, with Theresa May and Andrea Leadsom coming top in the second MP’s ballot. Conservative members will now vote for the winning candidate with the result due on 9 September.

With investors firmly focused on next week’s Bank of England meeting, this morning’s trade data shouldn’t receive too much attention.


The single currency dipped by 0.2% against the US Dollar on Thursday.

The ECB’s meeting accounts on Thursday were fairly downbeat, warning that a Brexit would prove a “significant” blow to the Eurozone. Policymakers voiced fear that a Brexit vote could threaten both trade and financial markets in the Euro-area.

Trouble in Italy’s banking sector continues to increase pressure on the currency. Italian bank stocks have fallen 30% in the last 2 weeks. German industrial production yesterday was also significantly weaker than expected, falling by 1.3% for the month.

German trade figures are the only major economic data releases in the Eurozone today, although attention will be on the US.


The US Dollar ended 0.15% higher against its major peers yesterday.

Ahead of today’s labour report the monthly ADP employment figures, seen as a good indication of how strong the NFP figure will be, came in above expectations. The figure rose to 172,000 from a revised 168,000. Initial jobless claims also impressed again, falling sharply to just 254,000.

This afternoon’s labour report will undoubtedly be the main focal point today. Most economists and strategists expect a strong recovery in job growth after last month’s dismal report. General consensus is for a nonfarm payrolls figure of around 180,000 and an increase in the unemployment rate to 4.8% from 4.7%.

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