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Downward revisions to nonfarms keep USD under pressure, while France swings from right to left

Good morning


US dollar continued to weaken after Friday’s nonfarm payrolls.  On the face of it, the headline looked decent at +206k compared to an expected +190k, and the initial move was a push higher in USD.  However the previous reading was revised sharply lower from +272k to +218k, indeed the revisions lower to the previous two months data totalled some 111k.  The unemployment rate also ticked higher to 4.1%.  The overall softer readings serve to underline the recent feeling that the US are seeing something of a slow-down and strengthen the idea that we could see a cut by the Fed in September. 


GBPUSD traded up to 1.2815, EURUSD up to 1.0840, while USDJPY dipped to 160.35.  On the open we again saw a bit of USD strength but as I type GBPUSD is 1.2810, EURUSD 1.0830 and USDJPY 160.90. 


In France, the elections provided something of a surprise, as Le Pens RN party failed not only to win a majority but came in third in the overall voting behind the left wing New Popular Front (NFP) and Macrons Ensemble.  It is a bit of an ‘out of the frying pan, into the fire’ situation.  There were the usual cheers that the more right wing parties failed to capitalise on their gains at the elections last week, however it must be said that the far-left now hold more sway, with their leader Melenchon likened to a more radical, Corbyn-style of thinking, which could well undermine some of the economic work Macron has put in place.  Indeed Melenchon immediately said he wanted to implement his manifesto in full and wanted nothing to do with a coalition with Macron.  It is a huge swing from what at one point looked like a far-right win, to a far-left win.  With no majority, France could well struggle with a lack of political direction and inability to make decisions in the coming months.  Many expect a new election inside a year as the current political positon is likely to be unworkable.


The single currency has held up well.  It lost a little ground initially, with GBPEUR trading up from 1.1825 to 1.1850 but since the move on the open it has come back to the 1.1825 area.   


So from the left wing victory in France to the UK, where of course Labour are now in power after an election with a low turnout and little support for any party despite Labour’s huge majority.  The Tories are going to have to go into full rebuild mode, they’ll be looking for a new leader following Sunak’s resignation.  Who is willing to take on that poisoned chalice?  Anyway, today we will hear from the new Chancellor, Rachel Reeves, at around 10.30 as she outlines her plans for the economy.   That is likely to be highlight of the day given the very sparse calendar today, while the highlight of the week will certainly be US CPI release on Thursday.


In sport over the weekend we saw Englands rugby team lose by just one point to the All-Blacks, which isn’t a bad result although with a couple of better penalty kicks we could have won it.  Lewis Hamilton won the British Grand Prix which was something of a surprise but hopefully signals an end to the domination of the sport by Red Bull.  And of course, Englands football team got through to the semi-finals of the Euro’s with a win on penalties over Switzerland.  The overall performance was mildly better than in previous games, we’ll face Netherlands next and will need to show another step up in performance if we are to make it into the finals.  Spain will take on France in the other half of the draw, Spain are now favourites after their victory over hosts Germany.  Spain v France is Tuesday, England play on Wednesday.


I have to admit I was a bit miserable over the weekend.  I’ve been back about a week from holidays where temperatures were in the high-20’s/low 30’s, my weekend was spent sitting indoors looking out at the torrential rain falling from the skies.  OK, so it is Wimbledon and the British GP, so of course its going to rain, but I’m now really fed up with this lack of summer, particularly when I had planned on playing more golf to build up a small degree of fitness.  Of course, its sunny this morning, now I’m sitting at my desk.    


Enough of my moaning, life could be worse, I guess.  Let’s see what Reeves has to say before I pack up my things and move to somewhere warmer.


-  10.30 UK Chancellor Reeves speaks

-  00.01 UK BRC retail sales

-  01.30 AUS Westpac consumer confidence



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