|
US
Dollar Slips as NFPs Fall for Eighth Consecutive Month
The US dollar has pulled back across the majors as US
non-farm payrolls fell more than expected in August by
84,000, marking the eighth consecutive month of
contraction in US job growth. Perhaps even worse than
that, the unemployment rate surprisingly rocketed to a
nearly 5-year high of 6.1 percent from 5.7 percent.
On the other hand, average hourly earnings actually
picked up 0.4 percent during the month of August,
pushing the annual rate up to 3.6 percent from 3.4
percent. The data provides a very skewed picture to the
Federal Reserve, as employment growth slows but wages
pick up. This will stir fears amongst the FOMC members
that surging food and energy prices over the summer has
led the public's inflation expectations to rise and
thus, has lead them to demand higher wages. It is this
"wage price spiral" that any central banker fears most,
and as a result, the Federal Reserve is likely to
continue sounding hawkish in the commentary.
Nevertheless, the sentiment that may ultimately feed
through into the US dollar is that the central bank is
unlikely to take action anytime soon, as employment
conditions are weaker and threats to US economic growth
as rising.
The reigning champion for economic event risk, the NFPs
have seemed to lose their influence over the past few
months. However, this won’t last for long. Consumer
accounts for 70 percent of the US economy; and there
employment and wages direction translate into spending
and expansion. With economists forecasting the eighth
consecutive contraction from this series (the longest
trend since the fallout from the last recession), the
optimism surrounding the strong 2Q GDP number will
quickly fade. Looking more critically at the last growth
report, trade accounted for 3.1 percentage points of the
3.3 percent pace of expansion, while consumer activity
stalled. If that turns into a consumer contraction,
there is little hope for growth.
• EURUSD –
German industrial production fell more than
expected, sliding to -0.6 from a revised reading of 1.5%
in June. Production activity declined as durable good
orders dropped 6.5% followed by a 3.7% drop in capital
goods. The economy outlook for the Euro-Zone has clearly
deteriorated, and conditions may only get worse as the
global economy weaken.
• USDCAD – Canadian employment rose
more than expected, surging to 15.2K from -55.2K in
July. The bigger than expect gain was led by a 16.1%
increase in full time positions. A deeper look into the
report showed that manufacturing employment rose 13.8K,
while part time jobs improved to -0.9% from -48.1%.
Meanwhile, the unemployment rate crossed the wires
better than expected as it held steady at 6.1% for the
second consecutive month.
• USDJPY – Japanese business
investments plunged to -6.5% from -4.9% in the first
quarter as firms grappled with higher input costs amid
fading demands. The release failed to meet expectations
for an improved reading of 0.9%, stoking growth fears
for the world’s second largest economy. Capital spending
excluding software fell for the fifth consecutive month,
slipping to -7.6% in the second quarter. Economic
activity has certainly deteriorated over the past few
months, and conditions may only get worse as the global
economy continues to cool.
Please visit our website
www.swissfs.com for more information.
|
