Positive jobs numbers can’t lift economic outlook
Wednesday 1 July, 2020
Daily Currency UpdateUSD - United States DollarPrivate sector employment increased by 2,369,000 jobs from May to June according to the June ADP National Employment Report released this morning. While this was below expectations, it was a positive sign that hiring picked up in the month of June.The data provides an early look at employment growth, and job creation is a leading indicator of consumer spending. The ADP jobs data stood in stark contrast to yesterday’s activity.The US dollar came under pressure yesterday as coronavirus cases rose by 47,000 showing the US is losing its battle with the pandemic. California, Texas and Arizona have emerged as new US epicenters of the pandemic. Already states have begun to reimpose lockdowns. This, along with continual US-China tensions, and the US dollar being sold at end of quarter flow, overshadowed local data that was starting to paint a prettier picture on recovery. EUR/USD touched 1.1250 yesterday and GBP/USD topped at 1.2400. Until market focus shifts away from risk and back to the underlying economic fundamentals, we expect a protracted period of choppy trade with firmer support and resistance bands.
Key MoversUK GDP data did little to help the falling pound yesterday morning with the final q/q figure coming in worse than expected. The early news saw the pound drop to 1.2260 versus the US dollar and 1.0935 against the euro. Prime Minister Boris Johnson announced a plan to fast-track GBP 5 billion of infrastructure investment and slash property planning rules to revive the UK economy. The news was expected and had little impact on the pound as many believe it is too low a figure when taking into consideration the increase in recent government intervention/stimulus to aid the UK recovery from the pandemic.The Australian dollar trended higher through trade on Tuesday, buoyed by a surge in demand for risk as month end flows dominated direction. Having traded sideways for much of the domestic session the AUD bounced off intraday lows at 0.6838 and pushed back through 0.69 US cents following equities higher. The S&P 500 advanced nearly 1% on the day closing out its best quarterly performance in over 20 years, highlighting just how quickly financial markets have bounced back from the panic that enveloped markets at the beginning of the COVID-19 pandemic. The question now is, can the upturn be sustained? The alarming uptick in new coronavirus infections has certainly curbed the pace of gains enjoyed through April and May, while underlying fundamentals suggest a long and protracted broader economic recovery.Haven currencies underperformed with the JPY and USD giving up gains as the risk on narrative fueling equity markets filter into currencies.
- USD/CAD: 1.355 - 1.361 ▼
- GBP/USD: 1.236 - 1.246 ▼
- EUR/USD: 1.119 - 1.127 ▲
- USD/AUD: 1.44 - 1.452 ▲