USD Weakens on Discouraging Job Report

Edited By Vani Rao

Better-than-expected GDP growth fails to prop up USD

EUR/USD

The EUR surged higher on Friday, August 1, 2014, against the dollar, after the US published its weekly report on initial jobless claims. Despite the encouraging Q2 GDP growth, the data showed that the US economy added fewer-than-expected jobs in July 2014. According to the US Labor Department reports, the US economy added 209,000 jobs in the month of July, which is below the forecasts for jobs growth of 233,000. Also, the US unemployment rates ticked up to 6.2% last month from 6.1% in June. Additionally, wage growth was almost flat, indicating an underlying slack in the overall economy.

On the other hand, the announcement of a possible rate hike by the Federal Reserve in the early part of the week prompted investors to trim back expectations, pushing the dollar rates downward. The EUR/USD pair ended 0.29% higher at 1.3427 on Friday, August 1, after fluctuating between 1.3377 and 1.3443. The USD Index, which follows the performance of the greenback versus a basket of six other major currencies, was down 0.19% at 81.39 on late Friday.

At the time of last reporting, the EUR/USD pair was trading at 1.3420, down 0.07%.

Source: Bloomberg
Source: Bloomberg

In the forthcoming week, the UK and the US are scheduled to report a series of key data. Currency experts will keep a close watch on the following data releases while framing their trading strategies.

On Monday, August 4, 2014, in the Eurozone, Spain is set to release its report on the change in the number of people employed.

On Tuesday, August 5, the Eurozone is expected to release its reports on retail sales. Meanwhile, Spain and Italy are scheduled to produce reports on service sector activity.

On the same day, the US is to publish data on factory orders and the Institute of Supply Management will release data on service sector growth.

On Wednesday, August 6, in the Eurozone, Germany is expected to release data on factory orders. Meanwhile, the US is set to publish data on its trade balance.

On Thursday, August 7, the European Central Bank will announce its benchmark interest rates. Meanwhile, the US is expected to publish weekly data on initial jobless claims.

On Friday, August 8, in the Eurozone, France is expected to report data on industrial production. Meanwhile, Germany will release data on its trade balance.

GBP/USD

The GBP fell to a one-and-half-month low against the US dollar on Friday, August 1, 2014, on account of weaker-than-expected US jobs growth in the month of July and a slowdown in the UK manufacturing sector. The GBP/USD pair fell 0.38% to end at 1.6821 on late Friday, after oscillating between 1.6799 and 1.6891. Furthermore, for the week, the pair declined 0.94%.

The GBP remained weaker after the UK reported that the manufacturing sector expanded at the slowest pace in a year in the month of July. The manufacturing purchasing managers’ index for the month of July fell to 55.40 from 57.20 in June, the lowest level since July 2013. The Bank of England (BoE) has indicated that it expects the economic recovery to slow down in the second half of the year, but the data could little alter on account of the interest rates hike by the central bank.

At the time of last reporting, the GBP/USD pair was trading at 1.6828, up 0.03%.

Source: Bloomberg
Source: Bloomberg

The UK and the US are scheduled to release key data in the forthcoming week, which are likely to cause significant movements in the currency market. Analysts will be looking forward to changes in the relative price of the US and the GBP in the coming week in the light of key data releases by both these economies. Crucial data releases by both the US and the UK are expected to have a significant impact on the US dollar in the weak ahead.

On Monday, August 4, the UK will publish data on construction sector activity.

On Tuesday, August 5, the UK is scheduled to release data on service sector expansion.

On Wednesday, August 6, the UK is expected to release manufacturing and industrial production data.

On Thursday, August 7, the BoE is scheduled to release a report on its benchmark interest rates, following by its monthly rating review.

USD/JPY

The US dollar fell lower against the Japanese yen on Friday, August 1, 2014, following the latest US employment report, which reduced speculation that the Federal Reserve could raise rates sooner. The USD/JPY inched down 0.18% to 102.61 late on Friday, after vacillating between 102.32 and 103.01. However, the pair ended the week with a gain of 0.84%.

At the time of final reporting, the USD/JPY pair was trading at 102.65, up 0.03%.

Source: Bloomberg
Source: Bloomberg

The USD/JPY pair is likely to fluctuate ahead of significant data releases by Japan in the coming week. Industry experts will look forward to changes in the relative price of the US and the Japanese yen in the coming week, ahead of key data releases.

On Friday, August 8, Japan is set to publish key data on its current account.

On the same day, the Bank of Japan will announce its benchmark interest rates and publish its rates statement, which outlines economic conditions and the factors affecting its monetary policy decision.

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