Spike in US employment makes further interest rate hikes more likely

The July employment report, released by the US on Friday, threw some stellar numbers into the mix. The markets had been expecting a quarter of a million fresh jobs to have been created in July but the actual number was 528,000 and that bought the unemployment rate down to 3.5%, matching the lowest level since the late 1960s. The US employment data is well known for its revisions, so we can’t rely on this number being maintained when the August report is released but, add in the 5.2% rise in average pay over the past year and it is safe to say that, unless the US Federal Reserve has an enormous change of heart, we ought to expect further interest rate hikes or between 50 and 75 basis points at their next meeting and the financial markets are already pricing that in. Having dived to $1.2015, the GBPUSD rate is back up to $1.2090 this morning and looks like it has further to rise. The EURUSD rate has also bounced but not quite as substantially. This pair is around $1.0175 at the time of writing. The big data items for the US Dollar this week are inflation figures on Wednesday and the weekly jobless claims numbers on Thursday.

Small changes in Canada’s employment data

Canada’s unemployment rate remained at 4.9% in July. The employment report, released on Friday shows the number of Canadian employees dropped by 30,600 in the month, following 43,200 fewer jobs in the previous month. This data was weaker than the markets had been expecting. The general consensus had been the growth of 15,000 jobs but the markets had also expected the unemployment rate to edge higher, which it did not. Perhaps unsurprisingly, the GBPCAD rate is largely unchanged, hovering just below CAD 1.56 this morning.

GBPEUR flatlining

The GBPEUR rate dropped 1.75 cents on Thursday and Friday and has flattened out since then. Having been severely under the cosh due to the Ukraine conflict and Russia’s trade wars with the EU, the euro reacted well to the news that some energy products will still make it from Russia to Europe. This will be a busy week for this pair though. We have inflation data from many European states this week and eurozone industrial production on Friday. We will also see UK economic growth data on Friday. An annual growth rate of 2.8% seems likely but so many data releases have surprised the markets over the past few months that there won’t be any chicken counting until this egg is hatched. I suspect that the data won’t be quite as pessimistic as the Bank of England would like us to believe, but the BoE Governor’s job seems to be ‘Chief Sterling Weakener’ these days. Aaaanyway, the GBPEUR rate starts the week at around €1.1865.

Pick your currency, check the rate

✓ Friendly, fast & reliable service ✓ Secure bank transfer ✓ Excellent Competitive rates
  • (No cash, bank to bank transfers only.)