- Friday’s Non-farm Payroll came in weaker than expected at just 114k against expectations of 175k, triggering a US dollar sell off. The unemployment rate came in at 4.3% alerting fears of a softening economy and jobs market. The softer than forecast data makes a September rate cut even more likely and possibly opens the door to a 50bp reduction from the Fed. The Japanese yen continued its rally, further boosted by the weaker dollar to trade at a fresh low in the mid 142’s.
- It is a quiet week for both UK and euro area data, with German Industrial Production data the main event on the docket. German industry is continuing to struggle as high energy costs and weak global demand weigh on the sector. EURUSD is hovering around 1.09 after trading as high as 1.0940 after the disappointing US labor market report.
- Markets will be paying close attention to Fedspeak in the coming weeks to see if a 50bp cut in September is on the cards. With the central bank continuing to be “data dependant” officials will sit up and take notice of the poor labor market outlook and the impact on the outlook. Later today we await the ISM Services Index which is expected to remain stable but below the 50 mark that separates contraction from expansion. There is very little data on the docket until Thursday’s initial jobless claims which could come in above 250k pointing to further weakness in the employment market.
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