“There are decades where nothing happens; and there are weeks where decades happen.”
With respect to the early 20th Century Soviet leader, pound traders no doubt feel like they’ve seen a decade’s worth of Brexit news crammed into just the first 24 hours of the trading week already!
Uncertainty is usually bad. But with regards to the resignation of David Davis, market participants think it may actually be a good thing as far as the pound is concerned. The Brexit secretary resigned after the UK Prime Minister Theresa May forced through a new “soft Brexit” strategy she intends to present to the cabinet at Chequers.
The U.S. dollar fell against major pairs on Friday despite a strong June jobs report due to the impending start of tariffs against Chinese goods and the retaliation from the Asian nation on U.S. exports. The U.S. economy added 213,000 jobs and wages rose 0.2% but it is the threat of trade war escalation that put pressure on the U.S. currency.
The mixed-bag U.S. jobs report on Friday caused the dollar to weaken further, allowing the likes of the euro/U.S. dollar and the Aussie dollar/U.S. dollar currency pairs to push higher, while buck-denominated gold also got a boost. The U.S. dollar/Canadian dollar currency pair, meanwhile was hit with a double whammy as it not only fell on the back of the NFP report but the Canadian dollar also got a boost from the stronger Canadian employment figures.
After President Trump spoiled “traders’ Christmas” last month with a now-infamous tweet implying that the May jobs report would be strong, market participants were happy to get back to their “normal” tradition of overanalyzing and excessively dissecting the volatile monthly jobs report at the moment of its release today.
U.S. investors, out celebrating July 4 holidays, didn’t miss much at all yesterday in the markets. They are back today and with them, volatility is set to return. In fact, European stock markets have started sharply higher this morning although the forex markets have been fairly quiet so far as investors await key U.S. data releases later on in the afternoon, which should provide us vital clues about Friday’s key employment report. Depending on the outcome of today’s data, the dollar could start to move more meaningfully ahead of the jobs report on Friday.
The U.S. dollar ended higher for the third consecutive month in June and made a positive start to the new month and quarter on Monday. However, today it has given up Monday’s gains and was, therefore, trading flat on the week at the time of writing.
The U.S. dollar is higher against most major currencies on Friday. The Canadian dollar was the single currency that appreciated versus the greenback. The loonie moved higher at the end of the week with the release of a stronger than expected monthly GDP number. The softer trade comments also helped dissipate the risk aversion sentiment lifting the Canadian currency.
It has been a bit of a lackluster week; the FIFA World Cup has provided way more excitement for more people than the financial markets. Stocks fell at the start of the week but the selling didn’t materialize into a proper correction and equity indices managed to regain their poise towards the end of the week. The dollar also eased back towards the end of the week after trending higher initially in what has been a quiet week for data.
There have been some interesting moves in the markets this morning, in what is the last trading day of the week and month. But it remains to be seen whether there will be further follow-through in these moves once we head into the U.S. session. After all, it has been a very choppy week and we wouldn’t be surprised if the markets were to reverse, especially the equities.