Market Recap:
Signs of a cooling US economy are worrying investors and may move currency markets this week.
US nonfarm payrolls rose by 73,000 in July, well below expectations. This suggests a cooling in the previously buoyant US labour market, with the unemployment rate also trending upwards from 4.1% to 4.2%.
The dollar had enjoyed a good July against both the euro and pound, regaining some of the ground lost in previous months. But the downbeat jobs data killed that momentum, with both European currencies gaining ground at the end of last week.
The euro rebounded and is now up by 6.2% against the dollar over the last 12 months. Sterling is up over 3.7% over the same period.
Key indicators like jobs data are signals about the underlying health of economies. Investors are concerned that the US economy is losing steam, making the dollar less attractive.
Tariff troubles remain:
Washington now has trade deals in place with both Brussels and London, reducing the likelihood of unexpected tariff shocks creating money market volatility. Nevertheless, President Trump imposed levies on over 90 countries at the end of July.
Those most affected include India (25% tariff rate), Taiwan (20%) and South Africa (30%). Exchange rates could move significantly if the levies undermine global economic recovery.
Coming Up:
The impact of the latest tariff round will dominate sentiment, but traders will also be focused on some important economic data from the US and Europe. The SIM Services PMI will be released on Tuesday, offering a snapshot of the health of the US services sector. Factory order data, released on Monday, will likely show a sharp fall.
In the UK, attention will turn to the Bank of England’s August interest rate decision, due on Thursday. Markets expect a 25 basis point cut to 4%, as policymakers look to bolster a faltering economy. In the eurozone, German factory orders (Wednesday) and French industrial output (Tuesday) are key metrics.
