US DOLLAR FALLS AS US PRIVATE PAYROLLS MISS BADLY
The pound jumped after a bullish statement from Bank of England (BOE) governor, Mark Carney. Speaking at New Castle, the governor said that the economy recovered in the second quarter and blamed the first quarter slump on the ‘Beast from East’. In the speech, he said that he was encouraged by the recent data on consumer spending and the labor participation in the country. Other major news from the UK came from Jaguar Land Rover, which issued a caution in case of a no Brexit deal. The company said that its UK operations would be in jeopardy. This follows other cautions from other companies. This statement was rebuffed by a Tory MP – Owen Paterson – who argued that a hard Brexit would be better for the company. He argued that the EU would not place tariffs on the country because of the WTO rules. Also, he argued that a hard Brexit would encourage competition, which would lower the costs of the company’s inputs.
The euro jumped after Germany’s factory orders increased. The data showed that factory orders leaped by 2.6% in May, ending the losing streak from April and March of this year. This was higher than the 1.1% which traders were expecting. The improvement in the factory orders came at a time when European manufacturing numbers are disappointing as companies brace for a prolonged trade conflict. They also came a day after Angela Merkel issued a warning to Donald Trump about putting auto tariffs. She said that the European Union was prepared to retaliate, although that was not the best option for the two countries.
The US dollar fell after the private payrolls data from ADP missed analysts’ forecasts badly. In June, the report said that 177K people entered the private sector. This was lower than the expected 190K. In May, the private sector payrolls increased by 189K. The number dampens the mood for dollar investors as they wait for the official government numbers tomorrow.
The Swiss Franc was little changed today after the country released the CPI numbers for the month of June. The numbers showed that the CPI rose by an annual rate of 1.1%, which was in line with expectations, and higher than May’s CPI of 1.0%. The Swiss Franc has shown no intentions of hiking interest rates because the officials believe that it is overvalued. Year-to-date, the franc has lost 3% against the dollar and gained by 1% against the euro.
The EUR/USD reached the apex of the triangular pattern that has been forming for the past few days. The pair jumped, boosted by the encouraging industrial numbers from Germany and the disappointing employment numbers from the US. The pair is trading at 1.1714, which is slightly lower than the intraday high of 1.1720. After breaking out from the previous support and resistance, there is a likelihood that the pair will continue moving higher.
The USD/CHF pair was little moved today even after the inflation data from Switzerland. After the disappointing US jobs numbers, the pair moved slightly lower and is attempting to cross the important support level of 0.9910. If it crosses this level, the pair could continue moving lower and if it does, it will likely find support at the 0.9890 level.
Yesterday, the GBP/USD pair broke the important resistance level of 1.3170. It then crossed the important level of 1.3210 and today, it crossed another important level of 1.3250. This was after the bullish statement by Mark Carney who appears set to raise rates in August and the disappointing US jobs numbers. The pair’s momentum will continue as it tries to test the important resistance level of 1.3290.