The Pound moved above the 1.2500 level against the Dollar as improved risk appetite helped underpin confidence. The latest round of face-to-face UK/EU trade talks concluded a day early as today’s planned meeting between EU Chief Negotiator Barnier and UK counterpart Frost was cancelled. Both sides reported little progress with the usual areas of disagreement remaining the sticking points and Barnier again criticised the UK approach, but reiterated that agreement was possible. Sterling recovered to test the 1.1111 area against the Euro, although it failed to hold 1.2500 against the Dollar as the US currency pushed back.
UK consumer confidence edged up to -27 for the final June reading; just above consensus forecasts. Demand for “Sterling puts” (bets against the Pound) in options markets has dropped which should help support the UK currency, although underlying sentiment is liable to remain fragile, especially with further concerns over weakness in the jobs market. Sterling starts steady, around 1.2470 and pre-weekend positioning likely to be a significant factor.
US non-farm payrolls increased 4.80 million for June after a revised 2.70 million increase the previous month and above consensus forecasts of around 3.00 million. There was a further strong rebound in jobs within the leisure and hospitality sector with retail jobs also posting a strong recovery on the month.
The unemployment rate declined to 11.1% from 13.3% previously and below market expectations of 12.3% as workers returned from temporary lay-offs. There was, however, a further increase of close to 600,000 in the number of longer-term unemployed while average wages declined on the month as lower-paid workers returned to work. Initial jobless claims declined slightly to 1.43 million in the latest week from 1.48 million previously, although this was again above consensus forecasts for the week which maintained caution over the outlook. Significant concerns that the labour-market recovery would stall as states are forced to suspend re-opening.
The dollar initially edged lower following the data as risk appetite strengthened, but it gradually regained ground amid reservations over the outlook. US markets will be closed for the Independence Day holiday today which is liable to narrow trading ranges.
Please be aware there is a US Bank holiday today - USD Payments will be held until Monday.
The Euro again, rejected at the 1.1300 mark against the Dollar and accelerated its reversal during yesterday’s US trading session. The pair's pullback reached session lows at 1.1225 with the common currency unable to take advantage of Dollar weakness amid the higher risk appetite and has remained trapped within a tight trading range of between 1.13 and 1.12 levels.
As of writing, the Euro trades around the 1.1240 mark against its US counterpart.
Data to watch
9.30 GBP - Final Services PMI
Posted in Daily Market News on Jul 3 2020