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US dollar dips but Non-Farm Payrolls beat expectations

US payrolls are the strongest they have been for 10 months and President Biden is taking credit for delivering the right policies to get Americans back to work. The easing of restrictions is the main reason for the major uptick in leisure and hospitality, so a lot of credit should go to the vaccines for making that possible. The US dollar dipped a little today as it found technical resistance and the trade deficit grew.

Market Wrap

Maybe the cessation of unemployment benefits by half of the states in America had the desired effect of getting people out of their homes and back to work. Nonfarm employment in the United States came in at 850,000 in June beating expectations of 700k. As per the ADP figures hiring’s in the leisure and hospitality industry contributed the most increasing by 343,000 jobs following the easing of COVID-19 restrictions. The increased services hiring shows that Americans are likely to be using these services more and that means US dollars will be put to work in different parts of the economy, moving away from materials and goods. Over the coming weeks, if all else stays equal and restrictions are further reduced, we could see an accelerated decline in prices in second-hand cars and transitory inflationary related commodities.

US Factory Orders data showed that the volume of new orders had risen by 1.7% to $495.5 billion in May, following a decrease in figures the previous month. Demand is still high as

unfilled orders were up for the fourth consecutive month, landing at $1.21 trillion.

Today’s data also showed that the US trade gap had increased. A larger trade deficit typically adds pressure to the US dollar, and we should expect to see a depreciation.

When we talk about the trade deficit, we mean that the USA increasingly buys more goods and services from abroad (importing) than it is selling abroad (exporting).

The DXY has dropped from the resistance line we have been monitoring on the daily chart and the EURUSD, GBPUSD, and AUDUSD all benefitted from this reversal. The pound is up 0.37% today and flat for the week, whereas the Aussie is up 0.49% today but still down -1.16% for the week. The long bond ETF, TLT is up again today as yields across the middle of the curve to the long end depreciate further.

The Nasdaq was the biggest gainer in the major indices today rising 0.86% into the London close, with the other US equities indices rising to new highs. The Dow Jones Industrial Average has broken higher out of the consolidation pattern and its daily moving averages remain bullish and turning upwards. Over the last couple of weeks, I had been monitoring whether the DJIA and Dow Transportation Index could be making signals of a move lower, but this has now been nullified.

Oil is trading around the $75 price level as we all wait for the OPEC+ JMMC will come to some agreement. Across twitter reports of the UAE creating a bitter deadlock in proceedings are softening, and 1according to sources, Saudi Prince Abdulaziz stressed the importance of continuing to monitor the market because despite the recovery in demand there are still risks that lay ahead, namely that of the covid-19 variants that are disrupting different parts of the globe. Today ECB President Lagarde said the “Delta variant is weighing on the balance of risks”, which is more dovish than her previous presser comments where she remarked risks are seen as “broadly balanced”.


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