Thursday, 2 Jul 2009

Dollar Gains over Worse than Expected Employment Data

The Dollar rose against most of its major currency counterparts Thursday following the release of worse than expected June U.S Non Farm Employment Change report. The report showed employers cut 467,000 jobs in June, compared to the expected 350,000 by economists. The weak report renewed concerns about the pace of the world economic recovery turning investors away from riskier currencies and commodities.

The EUR dropped to its lowest level since Monday, reaching below $1.40 and falling equities sent Oil Prices to below $66.50 a barrel. A mild statement from the ECB extended EUR's decline versus the USD. The Yen has also gained broadly today benefiting even greatly than the Dollar by the move to risk aversion as the Yen is more sensitive to movements in equities. Employment is an important indicator of consumer spending. As consumer spending accounts for 2/3 of overall domestic spending it is a leading indicator of economic health. The worse than expected results indicate that economic fundamentals in the U.S are still shaky and there are no clear signs of increase in demand in the near future, dampening investors' positive economic outlook on global recovery. With U.S markets closed tomorrow ahead of the 4th of July weekend, the focus will be on the GBP with the release of the Halifax HPI and Services PMI at 8:30 GMT.