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Job losses not as bad as feared, but still feared

Job losses not as bad as feared, but still feared

GBP

The UK jobs data added to concerns over underlying employment weakness and fears that the unemployment rate would shoot up once the furlough scheme ends. The Pound edged lower after the data but continued to find buying support on dips showing resilience despite concerns over the domestic economic outlook. Bond yields at the latest Treasury 5-year gilt auction declined slightly to -0.05% from -0.03% previously, reinforcing a lack of underlying Sterling support. Also, increases in new coronavirus cases and the threat of further lockdown measures provided an element of caution to Pound buyers. 

Overall the Pound was surprisingly resilient during the day and better global risk appetite allowed a push near 1.3130 on the dollar before fading while the Euro traded below 1.1111. Second quarter UK GDP contracted by 20.4% and the year on year figure showed contraction of 21.7%, but both estimates were marginally above the forecasts following better than expected recovery for June at 8.7%. Manufacturing data also beat expectations, but investment fell.

 

USD

The July US NFIB small-business confidence index declined to 98.8 from 100.6, maintaining speculation that the economic recovery overall was slowing. Job losses not as bad as feared, but still fearedThe dollar was unable to make any headway in European trading and gradually lost ground amid an absence of defensive support. The Euro pushed to highs just above the 1.1800 against the Dollar before hitting resistance.

Producer prices increased 0.6% for July after a 0.2% decline the previous month while the core rate increased 0.5% on the month with an annual increase of 0.3%.

The dollar was able to find an element of support during Yesterday afternoon with the Euro retreating slightly as commodity currencies also faded.

The US currency secured fresh support later in the day. Higher US yields underpinned the dollar early this morning while commodity currencies and gold retreated further.

 

EUR

The German ZEW economic sentiment index strengthened to a 71.5 for July from 59.3 previously which was well above forecasts of 58.0 and the strongest reading since early 2004. The current conditions component, however, declined marginally on the month and remained in heavy negative territory which indicates that there are still important concerns over the situation. The Euro-zone ZEW index strengthened to 64.0 from 59.6 previously.

On the data front, the only major news release for the Eurozone is the Industrial Production for June which is scheduled for release this morning, following which, the focus will shift across the pond. 

As of writing, the Euro is trading around the 1.1730 against its US counterpart.

 

 

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