US employment knocks USD
The US Dollar got a bit of a spanking on Friday after the non-farm payroll data disappointed analysts, whose estimates had looked a little optimistic. The forecasts were for 650,000 jobs being created but the actual data showed 559,000. That’s still growth but disappointed traders sold the US Dollar. GBPUSD spiked to fail just below $1.42 and the EURUSD rate failed just below $1.22.
The Canadian employment data was also poorer than forecast. Canada lost 68,000 jobs in May after losing 207,000 in April.
Sadly, productivity is still in decline and part-time employment showed another contraction of 54,200. All of that weakened the Canadian Dollar but GBPCAD, having spiked to C$1.7150 yet again, fell back in later trade and starts today at C$1.71 flat.
UK construction PMI boosts Sterling – briefly
Sterling’s spikes across the board were fuelled by the UK construction sector Purchasing Managers Index, which was the best since 2014. On this and other evidence of pent-up demand for the Pound, if it were not for the speculation over the June 21st reopening of the UK economy and ongoing wrangling with the EU, you would have to conclude that Sterling would be flying.
The Euro had a less buoyant day after Eurozone retail sales dropped 3.1% in April, meaning the annual rise was weaker than forecast but still a healthy 23.9%.
Chinese imports grow at the fastest rate in 10 years
Overnight we heard that Chinese imports grew at the fastest pace in 10 years in May. Rapidly rising commodity prices and recovering growth helped that year-on-year rise of 51% and boosted China’s trade surplus. There are growing calls for the boycotting of Chinese goods until the facts are revealed about the Wuhan lab and covid-19. Only people-power could achieve that. China holds huge economic and financial might. Their reserves were $3.198 thousand billion in April, so they could do a lot of damage if they decided to retaliate. Hence, governments will tread very carefully.
Commodity-linked currencies strengthen on Chinese news
That positive Chinese data has boosted the currencies of the countries that service China’s demand and export commodities. The Aussie, Kiwi, and Canadian Dollars are all stronger this morning, as is the South African Rand. In fact, GBPZAR is below R19 for the 1st time since January 2020.
Monday is very light on data. Other than the Uk Halifax house price index, the diary is devoid of tier 1 stimulus. The rest of the week is more vibrant. Tomorrow morning is likely to bring a contraction in Japan’s GDP, so look out for Yen’s weakness tomorrow. We will also see the Bank of Canada leave their base rate on hold but they may look at further QE to boost the economy. The European Central Bank will also, almost certainly leave their base rate unchanged but the statement they issue could shift the value of the Euro. US weekly jobless claims on Thursday will be watched closely after Friday’s disappointing May data and forecasters appear pessimistic about Friday’s British manufacturing data but personally, I think that may be stronger than forecast, so be ready for a bit of GBP strength late in the week.
And Sunday saw the official unveiling of The British Normandy Memorial overlooking Gold Beach in Normandy. It honours the 22,442 British servicemen who lost their lives in that horrific first step towards the liberation of Europe. We, who have never seen combat like that, would perhaps prefer not to imagine the hell that these heroic veterans went through but we have to give thanks for a very special generation and never forget them. I, like many others, wonder why it took 77 years to put this memorial in place.