- USD: Non-Farm Payroll results
- GBP: Not-so-fast rate hike fans?
- EUR: Greece deal not yet agreed-upon
- AUD: Continuing to strengthen
Non-Farm Payrolls came in at an increase of 215K, slightly under the 222K consensus. Some economists trying to forecast when the rate hike will have decided that any decent number supports a September rate hike. The 215K number and unemployment rate staying at 5.3% can best be described as just that, “decent.” Futures numbers continue to point to a 50/50 chance of September rate hike. The dollar was weakening considerably ahead of the non-farm payroll release, but is now strengthening a bit.
Reuters headline this morning was “No urgency to raise rates – Bank of England’s Broadbent.” The pound has continued to weaken in response. The Bank of England seems to be following the US in implementing a tightening of fiscal policy (raising rates “tightens” the cash flow of a country). It seems like ages ago, but in the US, the Fed started talking about the possibility of raising interest rates in March of 2014. It looks like 18 months later we may just be starting the hikes. So, if the BoE is using the US policy as a blueprint, there is a long way to go before UK rates actually rise. Next spring/summer would be a much better bet than 2015 or even early 2016.
Euro continues to give back its gains against the dollar it built through May and June. EURUSD touched as high as 1.1444 in mid-May, but has since returned to its late April levels. It seems that the “successful” negotiation of the Greece crisis may have been over stated in the strengthening of the euro. Germany is currently calling for a bridge loan to keep Greece going as negotiations drag on, rather than meeting France and Greece’s optimistic opinions that a new bailout package could be orchestrated by late August.
The Aussie is coming back with a vengeance after the rout in commodities hit it in a huge way. The past five days saw a huge jump in AUDUSD after the Royal Bank of Australia chose not to cut rates, in spite of economist expectations. Is this a temporary consolidation, or does it point to the bottom of the fretting about China and commodity sell-off?