The U.S. dollar is relatively unscathed following the drama around yesterday’s employment report. Non-farm payrolls rose an impressive 8.4 million in June, far exceeding the consensus forecast of a three-million increase. In normal times, such an outsized result would have sparked a huge U.S. dollar rally on the basis that the U.S. economy was vastly outperforming its G-10 peers. But these are not normal times.
The U.S. dollar did rally, but the gains were not impressive. The weekly jobless claims data, released at the same time, paint a different employment picture. Initial jobless claims were higher than forecast, but even worse, continuing jobless claims climbed to 19.29 million. Economists suggest that the weekly data point to a much weaker NFP result in July. The sharp rise in U.S. COVID-19 cases and the shuttering of recently re-opened businesses in some states supports that view.
The U.S. recorded 55,200 new COVID-19 cases on Thursday, according to the Washington Post.
Florida made a new single-day record with 10,109 new cases. The resurgence prompted some governors to mandate the wearing of masks in public, while others announced curfews. President Trump believes the increase in coronavirus cases is due to increased testing. He tweeted: "There is a rise in Coronavirus cases because our testing is so massive and so good, far bigger and better than any other country. This is great news, but even better news is that death, and the death rate, is DOWN. Also, younger people, who get better much easier and faster!”
FX traders aren’t so sure.
They sold U.S. dollars this week.
The New Zealand dollar led the commodity bloc currencies and the British pound higher since Monday’s open. The Japanese yen, Euro and Swiss franc are lower, in part due to the unwinding of safe-haven trades.
The Canadian dollar gained 0.60% since Monday, but not because of any domestic factors. The currency rode the coat-tails of improved risk sentiment, stemming from a more positive outlook for global economic growth, as measures to combat COVID-19, are eliminated.
U.K. and E.U. trade talks are depressing GBP/USD. The latest round of talks ended abruptly yesterday. The E.U. complained the U.K. did not understand the Eurozone position, while the U.K. said the E.U. must recognized British sovereignty.
FX price action will be limited today because U.S. markets are closed.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
