- The US nonfarm payrolls report revealed that fewer jobs were added in June.
- The market focus has shifted to this week’s CPI report.
- Markets raised the likelihood of a July BoC cut from 40% to 56%.
Currency futures edged higher on Friday as the dollar fell after the US monthly employment report. However, some outliers, like the Canadian dollar, plunged after poor Canadian employment figures.
US job market (Source: Bureau of Labor Statistics)
The greenback eased on Friday when the nonfarm payrolls report revealed fewer jobs added in June. Employment increased by 206,000 compared to the previous revised reading of 218,000. At the same time, the average hourly earnings fell from 0.4% to 0.3%. The most significant indicator of slowing demand in the labor market was the unemployment rate, which rose from 4.0% to 4.1%.
All the figures from last week, including initial jobless claims, private employment, and job openings, showed a downtrend in the labor sector. Consequently, there is rising pressure on the Fed to start lowering borrowing costs. Moreover, Powell also noted that inflation was on a downward path that would allow the central bank to begin cutting rates. After Friday’s figures, investors raised the likelihood of a cut in September to 76%. This weighed on the dollar and allowed most major currencies to climb.
The focus now shifts to this week’s CPI report. Economists predict a further easing of inflation from 3.3% to 3.1%. Meanwhile, the monthly figure could increase slightly from 0.0% to 0.1%. If the report reveals softer inflation, it would raise the likelihood of the Fed cutting rates in September.
Investors also focused on politics in the Eurozone and the UK. Notably, the euro rose after the last round of the French elections, which revealed that the National Rally took third place. This reduced fears of a financial crisis in the country.
However, the election outcome still complicated the outlook for politics in the bloc. Although the leftist alliance won the election, it failed to get a majority of the seats. Consequently, no group can pass policies and agendas without the support of another group, which could cause gridlock in parliament.
Meanwhile, the Labour Party won in the UK, boosting the pound. The party will likely implement policies that drive growth in the country.
Elsewhere, the Canadian dollar eased sharply after data revealed a 1,400 drop in employment. At the same time, the unemployment rate rose from 6.2% to 6.4%. After the report, markets raised the likelihood of a July BoC cut from 40% to 56%.
