USD stronger after 224K jobs were created in June (higher than 160K expected) and the unemployment rate was 3.7% (as expected). Job growth rebounded strongly (the most in five months) after slowing in May. Treasury yields and stocks also recovered. The jobs report also indicated moderate wage gains and evidence the economy was losing momentum, which may still encourage the Federal Reserve to cut interest rates this month. The next Fed monetary policy meeting is July 30-31 and markets have already priced in a 50 bps rate cut. Markets are also monitoring if the Feds will consider an easing cycle that may end with more rate cuts. Meanwhile, China is reluctant to buy any promised U.S. agriculture until the Huawei restrictions are lifted. Focus for USD this week is the FOMC meeting minutes available Wednesday and June Inflation Rate + Chairman Powell speaks on Thursday.
Canadian dollar highlights:
CAD defensive after the economy lost 2.2K jobs in June after two months of gains; however, wages increased the most in more than a year. Unemployment Rate for June also remained at 5.5% (as expected and same as previous). The Bank of Canada is not expected to cut interest rates this week and will continue to be patient. CAD also under pressure after crude oil prices dropped due to concerns of global economic growth after OPEC agreed to extend output cuts. Markets will also focus on the central bank’s monetary policy report and press conference on Wednesday.
EUR weakness continues after German factory orders dropped 2.2% monthly in May and decreased 8.8% year over year. The chances of the central bank cutting interest rates to stimulate the economy have increased. Central Bank member Olli Rehn said that “now is the time to act” (contradicting earlier suggestions to wait until September). Eurozone bonds have also been falling in anticipation of a rate cut. Christine Lagarde also supports current President Mario Draghi and will consider more accommodative monetary policy.
British pound highlights:
GBP continues to fall as poor economic data has caused concern for risk of a recession. GBP remains vulnerable and defensive due to the prospects of a hard Brexit led by Conservative leader Boris Johnson has increased. Johnson said the U.K. will be totally ready for a no-deal Brexit by October 31. In addition, last week’s disappointing Purchase Manager’s Index survey indicated the economy may have contracted in Q2. Expectations that the Bank of England will cut interest rates have also increased as markets have now priced in a rate cut after Governor Mark Carney’s dovish comments.