US payrolls came in at the low end of expectations on Thursday prompting a reshuffling of dollar positions. Figures for the two previous months were also revised lower. The dollar dropped against counterparts but regained strength later in the session after markets had time to fully absorb the reports. The headline figure showed that the US economy added 223k new jobs in June. The consensus was at 231k. The number was down on the previous month’s print of 254k but the report breakdown showed that business services, healthcare and financials all saw strong hiring in June. Trending down however were jobs in the mining sector. Construction remained stable. Initial jobless claims also saw an uptick last month.
New claimants filing for state support were recorded at 281k to the week ending June 26. Analysts had expected a slightly lower figure at 270k. Average earnings also missed expectations and remained unchanged on the previous month. On the positive side the unemployment rate fell to 5.3% last month beating expectations by 0.1%. Yields on US treasuries edged down on the day with the 10Y dropping three basis points as traders lowered their bets of a September rate hike.
Manufacturing data added to pressure on the greenback after factory orders showed a fall of one percent in May on the previous month. This was the weakest performance in five months. However much of the fall was due to lower activity in the volatile transportation category.
EURO FLATLINES AHEAD OF VOTE
EUR/USD found support around the lower end of the 1.10 channel but overall the trend was upwards for much of the session. Traders were optimistic of a resolution of the Greek debt talks after Sunday’s referendum. The latest opinion polls indicate a “yes” vote is likely. This comes despite the government urging voters to say “no” – which according to Syriza will strengthen their capacity to negotiate a better deal. Sentiment towards the “yes” camp is gaining momentum however after the ECB withdrew its emergency credit line to Greek banks. A move which forced banks to close and has paralyzed the country. Volatility and spreads are expected to be above average towards this evening’s close and on Monday morning.
Against other majors the euro held firm overnight. EUR/JPY was also mildly bullish. The pair moved back up to 136.58 after dropping into the 133 range late last week. EUR/GBP bounced back above 0.7104 recouping yesterday’s losses.
UK CONSTRUCTION RISES BUT HOUSE SALES LOWER
UK house prices fell in June according to latest figures from lender Nationwide. Prices fell by 0.2% on the previous month but the report showed strong regional variations. Robust activity in the construction sector helped to counter sluggish property sales. The latest purchasing mangers’ index for the sector rose to 58.2 beating expectations by 1.6 points. This was the biggest boost in construction in the past four months.
Cable remained range bound around the 1.56 level. After falling over two percent since last month’s peak, GBP/USD is finding support at the fifty percent retracement line, which lies around 1.5557. The correction has also taken the pair back towards the 50-day moving average.
The UK has minimal exposure to Greece, as underlined by the Bank of England’s governor recently. However the UK’s economy is intertwined with that of the EU and therefore any fallout that’s damaging to the Euro-zone could potentially hurt the UK economy as well.
AUSTRALIAN DOLLAR
Australian retail sales missed expectations coming in at 0.3% on the month to May. They were forecast to rise by 0.5%. Disappointing trade figures also weighed on the Australian dollar. The country’s trade deficit deteriorated to 2.8B AUD in May. Exports rose and imports fell, but not by as much as economists had predicted.
AUD/JPY slipped back to 93.33 losing over 1% on the day. AUD/USD edged down to 0.7579 continuing in a bearish downward trend on the daily chart.
Meanwhile the New Zealand kiwi has seen impressive falls against both the greenback and the yen. NZD/USD has fallen for all but one of the last eleven weeks taking the pair down to a five year low. The pair now trades at 0.6721. Upward retracements have taken place on the shorter duration charts but none have created a significant break in the bearish trend.
