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  • richard evans

Dollar lower after disappointing employment numbers

Good morning

The headline nonfarm payroll number was disappointing Friday, coming in at +235k from an expected +750k or so. Average hourly earnings were actually a little better than expected, while the unemployment was in line at 5.2%. Perhaps the ADP number is a better indicator than I give it credit for. Anyway the weaker headline number has made it less likely for the Fed to rush into any tapering announcement, in turn the US dollar weakened after the announcement.

Whether a possible delay of a month or so in a tapering announcement means we will see further USD losses remains to be seen. It isn’t as though taper talk has gone away, it may just have been pushed back a bit, so overall not a great deal has changed. However there are concerns that the delta variant is having a serious impact on the US recovery and if we see weaker data in the coming month or so the Fed may start to wind back their taper talk.

For now, GBPUSD is at 1.3850, having got within a few pips of 1.3900 on Friday, while EURUSD traded to almost 1.1900 Friday but is back now to 1.1865, pretty much pre-nonfarm levels. This leaves EURGBP a touch lower at 0.8575 (GBPEUR 1.1660). EUR not helped by comments from EU commissioner Geniloni who warns ECB that tightening monetary policy too soon would be a mistake, a timely remark given the ECB rate meeting later this week.

US holiday today, Labour Day, and with limited economic data elsewhere we could well be looking a quiet trading day. Don’t get too comfortable though, it’ll get busier as the week goes on. Aussie watchers should be aware of the RBA rate announcement due in the early hours of tomorrow morning, remember RBA had said they would begin tapering in Sept, there is a chance this is delayed given the rise of Covid infections and subsequent lockdowns that have been in place recently. Current rate is AUD5bio/week, they could leave as it is, lower to 4bio/week or perhaps take the middle ground with a ‘proposed flexible purchase amount.

In other news I see China has once again sent numerous aircraft in Taiwans airspace. I do see China wanting to take control of Taiwan and I fear they will use force to do so at some stage. The world will be forced to sit back and watch helplessly unless we want to be drawn into a major war. Worrying.

Of less importance was the news that the football match between Argentina and Brazil was abandoned after Brazilian health officials entered the pitch in a row over four Argentinian players who Brazil claim did not follow quarantine rules. The four all play in the UK and travel rules say that any visitor to Brazil from UK must quarantine for 14 days.

On the subject of football, my young team played a friendly at the weekend in preparation of the league that begins next weekend. The sun was shining, if only every Sunday morning was like that! Anyway we went a goal up early in the match, only to find ourselves 2-1 down at half time. A slight change for the second half saw us play better and we ended up comfortably wining 6-2. Bodes well for the season to come.

- 09.30 UK markit construction PMI

- 00.01 UK BRC retail sales

- 00.30 Japan household spending

- China trade balance

- 05.30 RBA rate announcement

- 06.00 Japan leading index

- 07.00 German industrial production

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