The US dollar continued to strengthen on Friday after US jobs growth rebounded strongly in June. The always highly anticipated Non-Farm payrolls number released on Friday afternoon increased by 224,000, the highest since January, comfortably higher than the 160,000 estimate and the previous reading of 72,000.
The upbeat growth in jobs reduces the chances of the Federal Reserve reducing interest rates by 50bps at their July meeting later this month, but only a moderate rise in wage growth added to signals the US economy is slowing so some analysts still expect to see a 25bps cut.
The US dollar index which measures the dollar’s relative strength against a basket of six other currencies rose to 97.43 on Friday afternoon, its highest in nearly 3 weeks, but still short of the 2-year high of 98.34 set in May before rumours of economic slowdown and rate cuts set in.
The euro came under pressure on Friday as the relentless decline in government bond yields forced investors to look elsewhere for higher yielding assets and data released in Germany showed factory orders for the year leading up to May fell to -8.6% from the previous reading of -5.3% set the month before and the consensus estimate of -6.3%.
The euro had its biggest weekly drop against the US dollar in 3 weeks but the declines were capped and EURUSD remained within recent trading ranges as investors believe any loosening of monetary policy by European Central Bank over the course of the second half of the year will be eclipsed by big moves from the Federal Reserve.
EURUSD opened 1.1267 and fell steadily until the US jobs data sent it down to a 2-week low of 1.1204, the euro bounced back slightly and reached 1.1228 shortly after close.
The pound fell to a 6-month low against the US dollar, in part due to the strong US jobs data but also a combination of weak data releases, growing chances of an interest rate cut from the Bank of England and continued political uncertainty.
GBPUSD followed the trend of EURUSD, falling steadily from an open of 1.2576 to 1.2555 and then sharply to a session low 1.2483 after the US data.
GBPEUR opened 1.1162 and fell to a low of 1.1130 during the morning, however the pound recovered in the late afternoon and reached 1.1168 after close.