Currency Note

Dollar recovers after disappointing Non-Farm Payrolls report

By Christopher Nye September 6th, 2021

Both the pound and the euro strengthened against the dollar at the end of last week following a disappointing US Non-Farm Payrolls report. The report revealed that the number of new jobs added to the US economy in August dramatically missed expectations, possibly due to a surge of Covid cases in the US. This morning, however, the greenback has regained some strength.

All eyes will be on the European Central Bank’s latest monetary policy meeting this week, in which the EU’s Pandemic Emergency Purchase Programme (PEPP) is likely to be discussed. Following a high inflation reading for the Eurozone last week, it’s thought that some officials will suggest that stimulus measures should be tapered soon.

To finish the week, a flurry of economic data for the UK is due to be released, including GDP and industrial production figures.

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GBP: Markets await slew of data releases on Friday

The pound was given a boost against the dollar on Friday after a disappointing Non-Farm Payrolls report for the US but has lost some of that strength this morning. Against the euro, sterling has strengthened.

This week, we can expect a quiet week for UK economic data until we get to Friday, when balance of trade, industrial production and GDP figures will be released. GDP is predicted to have expanded 8% year-on-year in July, a drop from June’s figure of 15.2% in June.

Sterling continues to be influenced by the UK’s COVID-19 situation, which could continue into autumn and winter. The success of the booster jab rollout will play a key part in the UK’s battle with the pandemic, with the JCVI announcing last week that anyone over 12 with a severely weakened immune system should receive a third vaccine.

GBP/USD chart over past year

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EUR: Euro pressured ahead of ECB meeting

The euro rose against the dollar throughout the course of last week, given a final boost on Friday following the US’ Non-Farm Payrolls report, but has weakened this morning as the dollar rebounds.

On Thursday this week, the European Central Bank will hold its latest monetary policy meeting. After a high inflation reading of 3% last week, there could be discussion over when the Bank should start to taper its quantitative easing programme. Several officials commented last week that this was likely to be on the agenda.

Tomorrow, economic sentiment and GDP figures are due to give an indication of how the European economy is performing.

USD: Dollar rebounds after disappointing Non-Farm Payrolls

The dollar weakened against several currencies on Friday after a disappointing jobs report, which showed that the economy added just 235,000 jobs last month. This morning, however, the greenback has rebounded, strengthening against both the pound and the euro.

This figure missed expectations of 750,000 and was the lowest reading in 7 months. It’s thought that a recent surge in COVID-19 infections may have discouraged companies from hiring and workers from looking for jobs. It was also a dramatic fall from the 1.1 million jobs added in July.

The disappointing report followed ‘dovish’ comments from Federal Reserve Chair Jerome Powell at the Jackson Hole Symposium, who expressed fears of the Delta variant damaging the economy.

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