North American Summary and Highlights 5 July

North American session

June’s non-farm payroll was slightly stronger than expected in the overall gain of 206k, but with significant negative back month revisions of 111k, while private sector payrolls rose by a weaker than expected 136k. With average hourly earnings up a moderate on consensus 0.3% and unemployment up to 4.1% from 4.0% the report is consistent with some loss of labor market momentum.

The USD made brief moves in both directions on the data before slipping later in the session. GBP/USD extended its post-election gains to 1.2815 while EUR/USD was marginally firmer near 1.0840. AUD/USD also made modest gains.  USD/CAD however finished up around 20 pips near 1.3635 with Canada’s employment report weaker than expected, down by 1.4k with unemployment up to 6.4% from 6.2%, though wages were stronger than expected. USD/JPY was little changed near 160.75. 

The Fed released its Monetary Policy Report ahead of Powell’s testimonies to Congress due on Tuesday and Wednesday, which reiterated greater confidence that inflation is moving sustainably towards target is needed before easing.

European morning session

GBP moved slightly higher through the European morning, with EUR/GBP dropping 10 pips to 0.8465 following the confirmation of a victory for the Labour party in the UK general election held on Thursday. EUR/USD was very marginally higher at 1.0825, but there was otherwise very little movement in the G10 currencies. 

Datawise we saw weak May industrial production data from both Germany and France, falling 2.5% and 2.1% m/m respectively. The German data saw the lowest level of production since the pandemic, following similar weakness in the orders data yesterday. Eurozone retail sales were much as expected, rising 0.1% m/m in May.