Months ago, many believed that EUR-USD parity was within reach, as U.S. economic reports showed strong signals of a healthy economy. March’s disappointing Nonfarm Payrolls, which missed the mark by 118,000 jobs, followed by a surprising Q1 GDP growth of only 0.2% vs 1% expected, meant the dollar lost most of the ground it gained since the beginning of the year.
Today, the Nonfarm Payrolls (NFP) report, one of the key barometers used to measure the state of the U.S. economy, reported 223,000 jobs were added and the unemployment rate remained unchanged at 5.4%. This month’s NFP reported most jobs added were service-related, and the energy sector employment fell by 15,000. Since the beginning of the year, over 45,000 jobs were lost in this sector.
Wages rose by 2.2% on the year which is solid but probably not quite enough to cause inflationary pressure and hurry the Fed into hiking interest rates. I still expect to see a September interest rate increase by the Federal Reserve.
EURUSD is still digesting the payrolls report but the single currency’s softness ahead of Monday’s Eurogroup meeting cannot go unnoticed. I’ll be very surprised if a deal is forthcoming next week despite noises from Greece in the past few days. With International Monetary Fund repayments due throughout the month, the pressures on the Greek’s finances are only increasing, as will pressure on the euro.
GBPUSD is higher after the shock win for the Conservative party in yesterday’s UK’s general election, by a surprisingly wide margin. I think we will see some of that strength disappear in the next few trading sessions as the conversation changes to what happens now with a referendum on Europe, and with the Scottish Nationalists winning so many seats, whether there will be another Independence Referendum?
USDCAD has moved higher after Canada lost close on 20,000 jobs in April. Oil prices continue to hurt energy generating industries north of the border and we can expect the market pricing in additional help for the Bank of Canada if this persists into Summer.
AUDUSD has been helped lower by the RBA’s comments overnight. This is one of my favorite pairs to see lower in the coming weeks and poor Chinese trade data released overnight points to further pain for Australian export businesses.