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US dollar undermined by disappointing payroll print

currency-newsUS dollar undermined by disappointing payroll print
The US dollar stumbled on Friday, in the wake of a disappointing US payroll report, which raised doubts over the Federal Reserve’s tapering plans.

Meanwhile, the pound opens this week on the front foot, with GBP/EUR climbing to €1.1803 and GBP/USD rallying to $1.3668. GBP/CAD and GBP/NZD are buoyed at C$1.7013 and NZ$1.9685 respectively, while GBP/AUD holds steady at AU$1.8622.

Looking ahead, the publication of the UK’s latest jobs report will likely act as a key catalyst of movement in Sterling this week, and may help to reinforce the currency’s early gains.

What’s been happening?

The US dollar closed last week’s session on a sour note, after the latest US non-farm payroll figures printed well below expectations.

September’s release revealed that the US economy only added 194,000 jobs, less than half the 500,000 forecasts by economists.

More importantly, with the Federal Reserve currently viewing the strength of the labour market as a key barometer for the economic recovery, September’s lacklustre payroll print cast doubts over whether the Fed will be ready to announce its tapering plans next month.

Despite its negative correlation with the US dollar, the euro struggled to capitalise on its weakness on Friday, after Germany recorded its smallest trade surplus in over a year.

The pound, meanwhile, was able to broadly maintain its positive trajectory at the end of last week, bolstered by an upbeat market mood.

What’s coming up?

Turning to this week’s session, we can see the pound already on the rise, amidst growing speculation that the Bank of England (BoE) will start to hike interest rates in the near-term, in response to inflation concerns.

Also influencing GBP exchange rates in the first half of this week’s session, will be the publication of the UK’s latest jobs report.

Tuesday’s release could reinforce the upside in Sterling as economists forecast domestic unemployment will have dropped again in August, whilst wage growth is expected to have remained robust over the same period.

For EUR investors the focus looks to be on Germany’s latest ZEW survey, which will also be published on Tuesday and may pressure the euro as it is expected to report economic sentiment in the Eurozone’s largest economy continued to deteriorate this month.

Finally, the release of the US consumer price index will be in the spotlight for USD investors this week. Will an acceleration of US inflation in September bolster the US dollar?
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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