Home Daily Commentaries USD weakens after upbeat US jobs data lift market sentiment

USD weakens after upbeat US jobs data lift market sentiment

Monday 8 August, 2022

Daily Currency Update

The US dollar weakened on Monday after beating all G10 currencies last week following a better than expected non-farm payrolls print, lifting market sentiment and drawing demand away from the safe-haven currency. The US economy added 528,000 jobs in July, way above expectations of 250,000. Unemployment also declined to 3.5% as the labor market remains tight. Average earnings ticked higher to 0.5%, increasing year-on-year to 5.2%. It is expected the  US Federal Reserve will remain aggressive in its monetary policy tightening and is likely to hike another 75 basis points in September, according to the CME Fedwatch Tool – pricing it as a 68% chance, which is up from 28% on July 29. This week we expect US CPI data due on Wednesday and US PPI on Thursday to be key drivers. The monthly Core PPI is expected to rise by 0.4% in July, taking the year-on-year number to 8.6%. The US Dollar Index was trading around 106.28 at the time of writing.  

Key Movers

Last week the Bank of England raised interest rates by 50 basis points from 1.25% to 1.75%, the central bank’s largest rate hike since 1995. The rate hike was followed by a release of negative predictions from the BoE. Inflation is predicted to peak in October 2022 at 13.3% for the UK, which would be a 42-year-high. Following this, the UK is expected to face five quarters of recession and then a number of quarters of flat growth. GBP sold off against all major currencies off the back of the negative outlook for the UK.  UK GDP is due on Friday, a -1.2% figure expected will back up the fears of recession later in the year. GBPUSD rebounded slightly off the back of a weaker US dollar on Monday, trading around 1.2079 at the time of writing.  

Expected Ranges

  • EUR/USD: 1.016 - 1.0219 ▲
  • GBP/USD: 1.2049 - 1.2132 ▲
  • AUD/USD: 0.6902 - 0.7005 ▲
  • USD/CAD: 1.284 - 1.2949 ▼