Weekly Market Update 2 July – Dollar extended its rally after better-than-expected NFP and PMI data; RBA’s monetary policy decision and Canada’s unemployment rate in view next week
Weekly Market Update 2 July – Dollar extended its rally after better-than-expected NFP and PMI data; RBA’s monetary policy decision and Canada’s unemployment rate in view next week
1. Dollar edged higher against the major currencies throughout the week following positive readings from the US non-farm payroll (NFP) and the US manufacturing Purchasing Manager’s Index (PMI) data. The addition of 850,000 jobs coupled with the June manufacturing PMI registering 60.6%, recording a 13th consecutive month of growth, shows the US economy is slowly picking up. Despite the bright backdrop, the June unemployment rate rose to 5.9%, up 0.1% from May, suggesting that the US economy still has much room to grow to meet pre-pandemic levels. Later this week, the FOMC meeting minutes would also be in focus.
2. Across the Atlantic, Sterling weakened against the Dollar and other major currencies such as the Japanese Yen and the commodity currencies. BoE Governor Andrew Baily cooled the inflation talk earlier midweek by urging policymakers not to overreact to what he said was likely to be a “temporary jump in inflation”. UK’s rapid growth surge is likely to fade given the weaknesses in the labour market and supply chain bottlenecks which further pose downside risk. Looking ahead, it is a relatively quiet week for the Sterling while investors will be keeping a close watch on the ECB meeting minutes.
3. Commodity currencies have been relatively bearish against the Dollar in the past few weeks. All eyes would be on Reserve Bank of Australia (RBA) Governor Philip Lowe speech on their monetary policy decision on Thursday. Elsewhere, investors would be focused on the Canadian employment rate as they look towards a relatively unchanged backdrop.
