US unemployment up and German exports down
Friday saw yet another volatile day for Sterling with an initial drop to the 1.2900 region against the Dollar. There was a subsequent sharp surge above 1.3000, but GBPUSD retracted back sharply to trade back where it started the day – around the mid-1.2900s.
The latest trade data from the UK was slightly better than expected as the goods trade balance printed at -£9.9b. There were still important concerns surrounding the underlying trade outlook, however, especially with exports still under pressure despite a weaker Pound.
With no key data due from the UK today, the market will be preparing for Thursday’s Bank of England policy meeting, especially as there is the possibility of an interest rate reduction.
A surprisingly strong US Nonfarm payrolls number turned out to be highly supportive for the Dollar on Friday. The 287,000 gain is the largest since October 2015. The Greenback, however, lost upside momentum after the downward revision of Nonfarm payrolls in May to 11k. June’s monthly average hourly wage growth also failed to meet expectations.
Today, Federal Reserve Bank of Kansas City President Esther George is due to speak about the US economy at the Mid-America Labour Management Conference. Comments from Fed officials will be watched closely as Friday’s weak earnings data may curb any remaining pressure for an immediate Fed rate hike.
In the Eurozone, a decline in German exports for May increased concerns of a downturn in the Eurozone economy and saw the single currency weaken by half a percent. There was further pressure added to the Euro as the uncertainty surrounding the Euro area and its member states continues as fears of a contagion is still disrupting the EU economy.
Data to Watch: 9am Italian Industrial Production month-on-month. 3pm Federal Open Market Committee (FOMC) Member George Speaks, USD Labour Market Conditions Index month-on-month.