02/07 – Jobs day in America

GBP: Dragged higher by risk

EUR: Watching the jobs numbers

USD: Can data beat the virus?

Sterling

Sterling has been dragged higher this morning courtesy of rising equity markets with European stock markets starting their 4th day of consecutive gains. Yesterday’s global run of brighter manufacturing data won’t be enough to attach rockets to the latest run higher in risk but it is providing able support.

We expect the pound to follow the wider mood in risk today with all eyes on the US run of jobs numbers this afternoon.

Euro

The single currency is grinding higher this morning ahead of the region’s latest unemployment release. Expectations remain that the level of joblessness in the region will rise to as much as 8% this morning, a level not seen since mid-2018.

Following on from yesterday’s stronger than expected PMI sentiment numbers from Germany, France, Italy et al, a continuation of strong data, allied to some USD weakness could be the start of a decent push higher for the single currency.

US Dollar

Yesterday’s manufacturing numbers in the US were surprisingly good with the crucial component that looks at new orders in factories hitting the highest level since January 2019. One swallow doesn’t make a summer and the balancing act of stronger data with the continual increase in Covid-19 crisis means that, absent a sudden fall-off in infections, this good news rally will struggle to continue much farther.

This afternoon’s run of jobs data – both initial jobless claims and the latest payrolls data – ensures a confusing afternoon. While last month’s payrolls numbers were the largest positive surprise on record, the weekly look at the number of people still claiming unemployment insurance has remained stubbornly around the 20 million mark.

The recent weakness in the USD is the main engine driving everything from the rise in EURUSD, to the push higher in equities but a jobs picture that could point to a slower recovery would likely end that this afternoon.

Elsewhere

NZD and AUD are also benefiting from the wider pick up in risk assets overnight. Local data remains important but a rising tide is lifting all boats this morning.

Have a great day and stay safe.

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Jeremy Thomson-Cook

Jeremy Thomson-Cook

Jeremy has over 13 years experience working in the FX industry. As a specialist in political risk mitigation and currency hedging, he regularly advises clients on the day-to-day moves of the markets and the implications of fiscal and monetary policy on international businesses.