There was a great amount of important economic data releases today. In the US, the key focus was on the non-farm payrolls jobs report, while the unemployment rate and average earnings growth were also of significant interest. Disappointing UK industrial and manufacturing production for May have been dictating sterling movements during the European trading session.
The much-anticipated jobs report today showed a gain of 222,000 jobs in the US economy for June, which followed a revised 152,000 expansion in May and beat forecasts for a gain of around 179,000 jobs. However, the wage growth came in below the expectations. Average hourly earnings increased by 0.2% month-on-month, following a downwardly revised 0.1% rise in May, but below the expected 0.3%. On a yearly basis, wages grew 2.5% in June. Meanwhile, the unemployment rate inched up to 4.4% from 4.3% in May.
The dollar market gave a mixed reaction against the yen, falling at first, but later gained ground and was testing the 114 handle. Markets might have gotten worried by the slower wage growth, which isn’t generating substantial wage pressure and this could translate to lower inflation growth. However, a pickup in job additions seems to have instilled confidence into investors that the Fed will continue with its plan of another rate hike this year and for balance sheet reduction.
Sterling was one of the worst performing currencies against the greenback as it tumbled on a disappointing manufacturing production figure for May. UK manufacturing production fell 0.2% in May, month-on-month, coming in below the expected 0.5% and the prior month’s 0.2% gain. Similarly, at a 0.1% decline, industrial output also disappointed, coming below the forecasted 0.4% gain. Pound/dollar fell a quarter of a percent following the release, last trading at $1.2875 as European markets were coming to a close. The figures were the latest in a string of weak numbers this week including a number of disappointing PMI numbers, pointing to a cooling economy and adding downward pressure on the pound.
The loonie leaped against the dollar on the figures pointing to a strong labor market in Canada. The upbeat data also adds to the speculation that the Bank of Canada could start tightening monetary policy as soon as next week during its planned policy meeting. At 45,300 there were far more job additions than expected (10K) in June, causing unemployment to dip. The unemployment rate was 6.5% in June, below the expected and the prior month’s 6.6%. Dollar/loonie fell 0.66%, below the 1.29 level.
Looking at commodities, a stronger US currency deterred demand for gold that has fallen to a two-month low, reaching an intra-day low of $1,213.15 an ounce.
Pressure on oil prices unfolded for the third consecutive day, with WTI trading at $44.23 a barrel and Brent at $46.76. Investors remain doubtful that OPEC-led production cuts will clear a global supply glut.
