The U.S. Dollar gained the most against the Euro since September as market investors sought refuge following the release of disappointing job reports. Another factor that contributed to the performance of the dollar was related to statements by officials from the European Central Bank indicated that the Euro-zone’s economy still faces a number of risks and uncertainties. But the greenback’s advance was limited as investors speculated on whether the Federal Reserve would implement further quantitative easing in order to step up growth. In the days to come, traders will pay close attention to any signals the Federal Reserve provides in anticipation of the two-day policy meeting scheduled for July 31st. The U.S. currency advanced against most of its peers, except the Yen, after Friday’s reports showed that employers only added 80,000 jobs when the forecast called for an additional 100,000.The report did contain some positive aspects such as the fact that the average hours worked climbed from 34.4 to 34.5 and the hourly wage earnings rose by 2.0 percent YoY. The Canadian Dollar slipped versus its American counterpart despite positive employment data out of Canada and rallied against most of its peers following announcements that the world’s most important central banks introduced further monetary easing measures to bolster economic growth. Canada’s Dollar reversed gains versus the greenback after U.S. job reports disappointed investors and increased the possibility of further action by the Federal Reserve.
The Euro plummeted to a two-year low versus the U.S. Dollar as lackluster employment data out of the U.S. and renewed banking liquidity concerns prompted investors to seek safe havens. The Euro traded below $1.2300 on Friday after the U.S. Department of Labor reported the employment sector only added 80,000 jobs in June. And although the data fell short of expectations, many market investors think this isn’t enough for the Federal Reserve to launch a third round of easing. However, market sentiment continued to weaken causing the shared currency to fall. This occurred after the International Monetary Fund’s Director, Christine Lagarde, stated that the IMF will have no choice but to reduce the growth forecast for this year given the weakness in the employment, investment and manufacturing sectors in the E.U., the U.S., India, China and Brazil. The Pound also finished the week lower against the U.S. currency, especially after dovish comments from BOE officials reignited fears over the outlook of the U.K.’s economy.
The Yen climbed against the U.S. Dollar after the release of employment data out of the U.S. caused ripples in the market as investors expected better employment figures. The Yen was also supported by lackluster news out of the Euro region where Spanish borrowing costs climbed back to 7 percent after the ECB announced an interest rate cut for overnight deposits.
Lastly, currencies from commodity-exporting countries slumped against the U.S. Dollar and the Yen as demand for risk assets declined. The Australian Dollar weakened in tandem with Asian stocks on worries that recent actions by the European Central Bank won’t be enough to stem the debt crisis. The Aussie erased the week’s gains as China lowered interest rates and the Bank of England augmented its asset-purchasing program.
EUR/USD- Euro Falls To Two-Year Low
The Euro dropped dramatically versus the U.S. Dollar amid worries the recent central bank’s actions won’t solve the crisis in the region. To make matters worse, Spanish borrowing costs rose to 7.0 percent as the ECB decreased the overnight deposit rate down to zero, renewing bank liquidity fears. Other reports showed that German Industrial Production remained unchanged in May, while it rose by 1.6 percent MoM. Additional releases revealed a minor decline in France’s Trade Balance but a hike in the French government’s deficit. In the coming days, Euro investors will focus on what ECB President Mario Draghi has to say when he testifies before Parliament.
GBP/USD- PPI Up
The British Pound fell against the majority of its peers on Friday though it remained strong versus the shared currency as risk appetite declined following the release of disappointing employment data out of the U.S. Demand for safe havens continued to benefit the greenback, especially as the ECB’s latest decision to cut the overnight interest rate to zero re-ignited fears over the region’s banking liquidity. Data issued last week in the U.K. showed that the services sector grew at the slowest pace in eight months while construction fell at the quickest pace in 2 ½ years.
USD/JPY- Leading Index Increases
The Yen rallied against the U.S. Dollar following the release of weaker than anticipated employment data out of the U.S. and despite the fact that Thursday’s ADP numbers pointed to positive NFP data. On the economic front, the country’s Leading Index for May climbed to 95.9, which is slightly higher than analysts forecast. The Coincident Index slipped from 97.0 to 95.8. And lastly, official Reserve Assets fell slightly to 1270.6 billion Yen.
USD/CAD- USD Hits One-Week High
The U.S. Dollar reached a one-week high versus the Canadian currency as speculations on further Federal Reserve actions pushed the greenback higher. The Loonie weakened further at the end of last week versus its American counterpart despite better than expected data on Canada’s employment sector which showed that 7,300 more people were hired,and the unemployment rate fell from 7.3 to 7.2 percent in June. The Loonie remained under pressure as light sweet crude oil posted an eighth weekly loss in the past 10 weeks and traded at $84.06 a barrel on the New York Mercantile Exchange.
Today’s economic calendar shows that Switzerland will announce its Unemployment Rate. The U.K. will report on the RICS House Price Balance. New Zealand will issue the NZIER Business Confidence; and Australia will release the NAB Business Confidence. It’s possible that China may publish findings on the Trade Balance.