U.S. Dollar Holds Firm

Daily Analysis - 07/08/2017

Robust Job Gains Underscore Economic Vitality


The dollar is holding ground early Monday after an upbeat U.S. jobs report saw the greenback rebound from a 30-month low against the euro. Stronger than expected U.S. hiring data underpinned the case for tighter monetary policy, lifting the dollar substantially on Friday.

Inflation in Focus

Data released Friday showed U.S. nonfarm payrolls rose by a larger than expected 209,000 jobs last month. The unemployment rate fell to 4.30% to coincide with a 16-year low achieved in May. Average hourly earnings grew by 0.30% to match forecasts after gaining 0.20% in June. The strong jobs report saw dollar bulls re-enter the market amid renewed hopes of a December interest rate hike by the Federal Reserve.

However, investors will be looking for further evidence of fundamental strength to solidify the upturn in the U.S. currency. The producer price index for July is scheduled for release on Thursday, while the consumer price index is due Friday. EURUSD is currently hovering around 1.17900. Friday’s intra-session low of 1.17200 marks the pair’s immediate support on the downside.


German Factory Orders Surge

German factory orders soared in June amidst broad domestic demand, suggesting a pickup in momentum in Europe’s biggest economy. Adjusted for seasonal fluctuations, orders jumped 1.00% after an upwardly revised 1.10% in May, per data from the Economy Ministry in Berlin. The reading stacks up well with a Bloomberg median estimate for a 0.50% rise. On a yearly basis, orders were up 5.10%, adjusted for the number of working days.

Manufacturing has been driving the recent acceleration in German economic growth. Confidence among businesses remains at a record high, while a steadily improving employment scenario is boosting domestic consumption and spending. The Economy Ministry will release June’s industrial production figures on Monday. DAX September futures rallied on Friday to end the session at 12291.


Canada Trade Deficit Swells

Canada’s trade deficit widened in June, as exports recorded a steep decline from lower shipments of energy and precious metals. The merchandise trade deficit increased to a seasonally adjusted CAD 3.60 billion ($2.86 billion) in June, versus a revised shortfall of CAD 1.36 billion in the prior month. Exports slipped 4.30% to CAD 46.51 billion, the largest decrease since February of 2016, while imports edged 0.30% higher to CAD 50.12 billion to set a new record high.

Economists at the Royal Bank of Canada had forecast a CAD 1.25 billion trade shortfall in June. The disappointing trade deficit figures mark a rare setback for the Canadian economy, which has been witnessing a strong recovery over the past one year. USDCAD was last seen around the 1.26400 mark.


Construction Activity Expands Across Australia

Australian construction activity expanded at its fastest ever pace in July, per the widely-followed Performance of Construction Index. The measurement rallied 4.5 points last month to 60.5, its highest level since the gauge came into existence in September 2005. The PCI tracks changes in activity levels across the Australian construction sector on a month-to-month basis. Figures above 50 indicate an expansion in construction activity, while figures below suggest contraction.

The latest upbeat report follows robust July readings on manufacturing and services, signalling that the Australian economy enjoyed a strong start to the second half of the year. AUDUSD is witnessing a minor pullback from a key resistance level at 0.79500 in Monday morning trade.


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