After a five-day losing streak, the euro/U.S. dollar (EUR/USD) currency pair has finally – at least for the time being – put an end to its recent downward trend and was climbing back towards the 1.16 handle. Other major euro crosses were also trading higher, suggesting it was not just the dollar weakness that had helped to underpin the EUR/USD.
The dollar has remained bid against most currencies post-Friday’s U.S. jobs report. The greenback rose on Friday in reaction to the mixed-bag nonfarm payrolls report which showed a weaker-than-expected headline number, but that was offset by positive revisions to the previous reports and a decent but expected rise in average hourly earnings figure.
The U.S. dollar fell on Friday after the U.S. Non-farm payrolls (NFP) came in below expectations with only a gain of 157,000, but otherwise the unemployment rate dropped to 3.9% and wage growth remained unchanged at 0.3%.
The euro was again the strongest currency among the majors this morning, rising most notably against the yen after the Bank of Japan delivered what turned out to be a rather dovish policy statement. The single currency has found support on the back of Eurozone data, which showed headline consumer price inflation rose in July at its fasted pace since 2012.
The U.S. dollar is mixed on Friday against major pairs. The U.S. economy grew at a 4.1% pace on the second quarter according to the first estimate. The number came in right on the forecast which had no positive effect for the U.S. dollar, but it did validate the U.S. Federal Reserve decision to keep a tighter monetary policy with two more rate hikes in the horizon this year.
All three of these currency pairs--the euro/U.S. dollar (EUR/USD), Aussie dollar/U.S. dollar (AUD/USD) and the British pound/U.S. dollar (GBP/USD) -- currency look great and are easy to count. Looking first at the GBP/USD, we see a five-wave drop in play down from 1.3213 area which is a trait of a bearish impulse, and which suggest where the intra-day trend can be going.
Market sentiment received a solid boost after US President Donald Trump obtained concessions from the European Union to avert a transatlantic trade war. The United States and Europe have reached a deal to work towards “zero tariffs, barriers and subsidies on non-auto industrial goods” in a bid to defuse escalating trade tensions.
Yesterday was the definition of what we have been preaching all week. There are many themes playing out but none more important than earnings. The S&P 500 and Nasdaq began ripping higher into the close on news that President Trump agreed to suspend implementing tariffs on the EU, most importantly on autos, after meeting with European Commission President Juncker.
It has been a rather volatile couple of days in the financial markets. Much of the volatility has been in the stock markets where the major indices rose sharply late in the day yesterday after the EU and U.S. diffused their trade disputes, only for the optimism to be met with a heavy 20% sell-off in Facebook shares in extended hours on the back of the social network’s poorly received earnings report and forward guidance.
The general theme in our recent posts has been about a possible correction or a retracement of some sort in US dollar. The greenback has indeed stopped going up but it hasn’t exactly sold off. Well, at least not yet anyway.