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Dollar Recovers on Friday's Strong U.S. Jobs Report

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USD

On Monday, the Greenback pared its gains vs. a basket of major currencies after an unexpected U.S. jobs report lifted it off 15-month lows, as US employers hired more workers than expected in July. According to the Labor Department, the U.S. economy added 209k jobs in July, above the expected gain of 183k. Despite such a strong report, investors are looking for further clues of robust fundamentals in order to firm up the dollar’s upturn.This week, markets are awaiting the U.S. producer price index numbers, as better figures could douse inflation concerns. In addition, the consumer price index figures are due on Friday; the data could confirm whether the labor market is strong enough to counter inflation.  

  • The U.S. dollar index (DXY), which measures the Greenback against a basket of currencies, settled at 93.441, recovering from levels below 92.800 pips late last week.

EUR

The common currency returned some of its gains against its rivals on the back of profit taking on Friday. Data from the common market area was better than expected with the German Factory orders increasing to 1.0% from 0.6% and the Italian retail sales also coming in better than the expected 0.6%. On the data front, we have the German Industrial Production and the region’s Sentix investor confidence index. 

GBP

The Sterling Pound held its own against its peers on Friday as traders cashed in their profits on Bank of England short positions. No major reports were out of the British economy at the end of the week. On tap today, we have the Halifax HPI with analysts expecting a 0.3% rebound in house prices.

JPY

The yen lost ground against its rivals on the back of higher US bound yields following the NFP release. Japanese data was also weaker than forecast with average cash earnings falling 0.4% against an expected 0.5 rise. On the data front, leading indicators data is due today with an improvement to 106.2% from 104.6% expected. 

Gold

Gold traded under pressure and settled near two-week lows, negatively affected by a rebound in the Greenback after stronger- than-expected U.S. jobs data.

Spot gold saw a little change to settle at $1,257.31, while U.S. gold futures for December delivery declined by 0.1%, to settle at $1,263.00. Technically, the yellow metal in not expected to trade too high as there are no geopolitical worries or tensions in the world, nor any extreme events.

Oil

Earlier today, despite the decline in oil prices it still settled near nine-week highs, backed by a collapse in the U.S. drill rig count and a strong U.S. jobs data. Today, representatives from OPEC and non-OPEC are set to meet in Abu Dhabi for a two-days meeting, to discuss ways to enhance compliance with their oil-production cuts agreement.

Brent crude futures fell as much as 0.32% or 17 cents, to settle at $52.25 a barrel, while U.S. crude futures down by 0.30 or 15 cents, to settle at $49.43 per barrel.

The most important economic events:

  • USD Consumer Credit (JUN): (GMT 19:00) – Medium – Forecast ($15.500b) – Previous ($18.410b).
  • JPY Trade Balance - BOP Basis (Yen) (JUN): (GMT 23:50) – Medium – Forecast (¥549.0b) – Previous (-¥115.1b).
  • JPY Bank Lending incl Trusts (YoY) (JUL): ): (GMT 23:50) – Medium – Forecast (N/A) – Previous (3.3%).
  • JPY Bank Lending Banks ex-Trust (JUL): (GMT 23:50) – Medium – Forecast (3.3%) – Previous (3.3%).

Disclaimer
The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.

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