USD consolidates after solid NFP result – FED on track for hike

US dollar rally

What Happened Yesterday

The USD gained on Friday after a report showed the U.S. economy created far more jobs than expected in June and previous months, keeping the Federal Reserve on track to raise interest rates at least one more time this year.

Following the report, the USDJPY rose to two-month highs of 114.17, in its largest weekly percentage gain since late April. The USD also climbed to a more than one-week high against sterling touching 1.2864 after a string of weaker UK data releases.

Friday’s data showed U.S. non-farm payrolls rose 222,000 last month, beating economists’ expectations of a 179,000 gain. Data for April and May was revised to show 47,000 more jobs created than previously reported.

On balance, the labor market continues to be solid and despite the softer inflation data as of late, the solid employment data should keep the Fed on course for policy normalisation.

While the employment headline number was strong, inflation pressure remained tame. Average hourly earnings, which currency traders monitor closely, increased 0.2% in June, short of the 0.3% expected and this was probably the main reason we didn’t see the USD take off against the other majors.

The Yen also slid earlier on Friday after the Bank of Japan said it would buy an unlimited amount of bonds, as it sought to put a lid on domestic rates pushed higher by the broad sell-off in developed market bonds.

After release of the jobs data, U.S. short-term interest rate futures showed continued bets the Fed would raise interest rates in December.

The Canadian Dollar

The Canadian dollar strengthened on Friday to nearly a 10-month high of 1.2857 against its U.S. counterpart after stronger-than-expected domestic jobs data boosted chances of an interest rate increase by the Bank of Canada as soon as next week.

Canada’s economy added 45,300 jobs last month, topping the 10,000 gain forecast by economists.

Expectations of a rate increase have been rising since top Bank of Canada officials said in June that a pair of 2015 interest rate cuts had done their job in cushioning the economy from collapsing oil prices.

Chances of a hike at this week’s rate meeting rose to 93% from 86% before the jobs report, data from the overnight index swaps market showed. The market has fully priced in an increase by September and has implied an 80% chance of a second hike by December.

What’s Happening with the Majors

EURUSD

EUR steady as she goes and I think it’s just about ready for a crack at 1.1445 resistance again.

GBPUSD

Sterling is under pressure after a run of weak economic data. I’ll be looking to sell on rallies for now.

AUDUSD

Sideways trading. We really need some fresh data to get this pair moving again.

NZDUSD

The Kiwi has been trading sideways for the past 3 weeks and I can’t see it changing unless we get some fresh data.

USDCAD

You’ve got to be looking to sell on rallies from here. BOC Rate Decision on Wednesday.

USDJPY

The trend is your friend. I’m looking to buy on dips back towards 113.25.

USDCHF

The Swissie has quietly drifted back into the range. But i still like it lower from here.

Economic Data Releases that matter

It’s not often we get a good chance to trade on Monday but the Chinese data is definitely worth checking out. The AUD & NZD will be in the firing line!

New Website Update

We’re just about ready to go….there was a Java script error causing a few issues so we’re just going to fix that and then we should be good to go.

I’ll give you some more details as we go. But it shouldn’t take very long at all.

I hope to get everyone online ASAP.

I’m not going to say tomorrow…. because every time I do something else pops up. I ‘ll definitely keep you posted.

Brad

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