Daily Brief

North American jobs beat forecast

US executive orders

On Friday, for the first time in more than six weeks, the US dollar was the top performer among the major currencies. US nonfarm payrolls increased by 1.763 million in July and, with revisions, were 180k more than forecast. The two seemed to be related.

Just about every component of the monthly US employment report was better than forecast. Average annual hourly earnings growth was almost unchanged and above forecast at 4.8% (inflation was last seen at 0.6%). Even the lower participation rate, down from 61.5% to 61.4%, was higher than the predicted 61.1%. The numbers continued the positive story told by Thursday’s weekly jobless claims, which were fewer than expected.

The outlook for the dollar was not affected by the US president’s executive orders on Saturday to extend Covid-related unemployment benefits, albeit at a reduced rate, and postpone collection of income taxes. Trump’s orders are intended to fill the gap created by the run-off of previous stimulus measures at the end of July. Democrats in Congress took a dim view of his action, which they saw as a blatant electioneering stunt, but the USD saw no ill-effects in the Far East this morning. It is an average of 0.3% firmer on the day, up by half a cent against the euro and the pound.


Canadian jobs up too

As in the United States, the Canadian employment situation also improved in July with the addition of 419k jobs after a net increase of 1.24 million in the previous two months. The data were not hugely helpful to the Loonie, perhaps because they were overshadowed by the US numbers which appeared at the same time. 

The CAD is two fifths of a cent higher on the day, supported also by the Ivey purchasing managers’ index which was more than ten points higher on the month and way above forecast. It lost a tenth of a US cent.

Sterling was pretty well out of the action at the end of last week. Following the Monetary Policy Committee’s decision on Thursday to keep monetary policy unchanged, the governor undertook a couple of interviews to dispel the idea that he is unduly optimistic about the UK economy. He told CNBC that he would “really lean back on people who think the Bank of England is optimistic”. To the BBC, Andrew Bailey said negative interest rates “are part of our tool box… but at the moment we do not have a plan to use them”. On Friday, the pound was just about unchanged on average.


NZ business confidence dips

The only vaguely worthwhile economic statistic on London’s agenda today is the Sentix index of Euroland investor confidence. All of the interesting numbers have come and gone.

Early today ANZ’s provisional business outlook survey showed NZ business confidence deteriorating by ten points to -42.4, its lowest level since the April trough. The evidence suggests that “the post-lockdown rebound may have run its course”. In China, headline inflation edged up from 2.5% to 2.7% while producer – factory gate – prices were 2.4% lower on the year. Norwegian inflation was almost unchanged at 1.3%.

Tonight’s data from New Zealand cover house prices and electronic card retail sales. In Australia, NAB reports on business confidence. There are Japanese data for bank lending and the balance of trade and the British Retail Consortium release its retail sales numbers for July.

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