USD stable after employment data but ‘Tapering’ talk lends support

The US of A created 850,000 fresh jobs in June and the data for the previous two months were revised to add another 15,000 jobs to the growth. That was well above expectations but the number of US citizens in work is still 6.8 million less than the peak levels in early 2020. The market reaction to this data was a little less enthusiastic than I would have imagined. The Dollar lost a little ground as traders tried to assess the impact of these numbers on the Federal reserve’s mooted plans to taper off their bond-buying.

Independence Day holiday implies a quiet afternoon session

So GBPUSD starts Monday at USD 1.3826 and EURUSD is at USD 1.1850 this morning. It is a US public Holiday in lieu of Independence Day, so the USD will trade far less volume than normal. It does mean the potential for volatility is increased though.

We had a smattering of overnight data. That included negative property and housing data from Australia. Private home approvals came in at minus 10.3%. That’s the 2nd worst reading since 2012. The GBPAUD rate reflected that with a half-cent rise but we may see further follow through on that rise, especially if the British Prime Minister’s announcement today is as bullish as expected.

UK reopening to be announced

Boris Johnson is expected to announce a full reopening of the UK economy, a move to make mask-wearing optional, removal of restrictions in free movement, and a lot of ‘Hear Hear Hear’ from his side of the House of Commons. The changes are not expected to come into force until the 19th of July. That will undoubtedly boost economic activity in the UK and unleash pent-up demand. So Sterling could well strengthen in the afternoon session if MPM Johnson’s announcement is as liberating as has been forecast.

China’s Caixin index signals end of post covid boost

We saw some unexpectedly poor data from China overnight. The Caixin service sector survey produced a 50.3 reading in June. That’s the lowest in 14 months. That and the other PMI style indices we have seen from China recently suggest the post-covid demand boost has ebbed away. The Indian (delta) variant is still having an impact in China, especially in the manufacturing heartland in Guangdong. This will have a knock-on effect on the countries that supply China in Asia and Australasia, and on their currencies.

The Euro has several purchasing managers indices to contend with over the next few days and a torrent of central bankers speaking on behalf of the European Central Bank today. I can count at least 4 and the President of the ECB, Christine Lagarde is in action twice. Whether any of them will say anything to move the euro is a moot point at this stage but any hint of the ECB taking some action would be enough to get EU traders excited. The GBPEUR  rate starts Monday around EUR 1.1650.

Overnight tonight, we will see a business confidence index from New Zealand and an interest rate decision from the Reserve Bank of Australia. No change is likely from the RBA but their comments re recent negative data will be of interest. There is a sprinkling of minor data too but nothing to trouble the scoreboard.

And as well as US Independence, the 4th of July is also worthy of note as the day, in 1865 when the first edition of “Alice’s Adventures in Wonderland” was published. That trippy tomb was created by Charles Dodgson under his nom de plume of Lewis Carroll. He was a mathematician by trade. My favourite of his quotes is, “If you want to inspire confidence, give plenty of statistics – it does not matter that they should be accurate, or even intelligible, so long as there is enough of them.” And politicians have been following that pattern ever since.

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