US Dollar Paring Gains After Initial Surge From July Jobs Report

Washington (Aug 6)  The dollar is up against all of its major rivals Friday afternoon, following the stronger than expected July jobs report. However, the buck has pared its early gains this afternoon as the prospects for a Fed rate hike this year appears more likely.

For the second consecutive month, the  Labor Department  released a report showing much stronger than expected US monthly job growth. The report released by the  Labor Department  on Friday showed that non-farm payroll employment surged up by 255,000 jobs in July after jumping by an upwardly revised 292,000 jobs in June.

Employment had been expected to increase by about 185,000 jobs compared to the addition of 287,000 jobs originally reported for the previous month.

Even with the stronger than expected job growth, the unemployment rate held at 4.9% in July. The unemployment rate had been expected to edge down to 4.8%.

With the value of imports increasing by much more than the value of exports, the  Commerce Department  released a report on Friday showing that the US trade deficit widened by more than anticipated in the month of June.

The report said the trade deficit widened to  USD44.5 billion  in June from a revised  USD41.0 billion  in May. The deficit had been expected to widen to  USD43.0 billion  from the  USD41.1 billion  originally reported for the previous month.

The dollar jumped to over a 1-week high of  USD1.1044  against the Euro Friday morning, but has since retreated to around  USD1.1095  .

 Germany's  factory orders declined unexpectedly in June on weak foreign demand especially from the euro area, official data revealed Friday.

Factory orders fell 0.4% in June from May, in contrast to a revised 0.1% rise a month ago, Destatis said. Economists had forecast a 0.5% rise for June after staying flat in May, as initially estimated.

 France's  trade deficit in June widened from a year earlier, figures from the French Customs showed Friday. The trade deficit rose to  EUR 3.44 billion  from  EUR 2.60 billion  in the same month last year. Economists had forecast a  EUR 3.9 billion  shortfall.

The French current account deficit widened on rising visible trade shortfall in June, the  Bank of France  said Friday. The current account shortfall doubled to  EUR 0.6 billion  in June from  EUR 0.3 billion  in May.

The massive stimulus package announced on Thursday was appropriate to deal with the high uncertainty caused by "Brexit",  Bank of England Governor Mark Carney  said.

In an interview to the LBC Radio, Carney said, "It's not radical, it's appropriate for the situation we're in right now which is there is more uncertainty because of the decision to leave the EU."

The central bank slashed its key interest rate by a quarter-point to 0.25%, the first in seven years. The bank also announced a Term Lending Scheme and corporate bond purchases, and increased the size of its asset purchases.

Carney said on Thursday that the  Bank of England  cannot fully offset the negative shock to the economy from "Brexit".

Citing a period of big adjustment ahead, Carney said, "So we're providing the stimulus the economy needs today for the future."

The buck rose to a 3-week high of  USD1.3020  against the pound sterling after the release of the jobs report, but has since eased back to around  USD1.3085  .

British house price inflation remained unchanged at a 12-month low in the three months to July, while they declined from the previous month, survey figures from the  Lloyds Banking Group  subsidiary Halifax showed Friday.

The  Halifax  house price index rose 8.4% year-on-year in the three months to July, same as in the June quarter, and the lowest since  July 2015  . Economists had expected an acceleration to 8.8%.

The greenback broke out to a high of  Y102.064  against the Japanese Yen Friday morning, but has since pulled back to around  Y101.725  .

Total labor cash earnings in  Japan  increased in June after falling in the previous month, preliminary report from the  Ministry of Health, Labor and Welfare  showed Friday. Gross earnings climbed 1.3% year-over-year in June, reversing a 0.1% drop in May, which was the first decline in eleven months. Economists had expected a 0.3% rise for June.

 Japan's  leading index held steady in June, defying economists' expectations for an increase, preliminary survey data from the  Cabinet Office  showed Friday. The leading index that signals the future economic activity, came in at 98.4 in June, the same reading as in the previous month. Meanwhile, it was forecast to climb to 99.7.

Source: AllianceNews