Here's why the US jobs data impacted financial markets last Friday..
| GBP
| The Pound ended a run of 6 consecutive daily declines versus the US Dollar last Friday, jumping 0.9% on the day.
However, Sterling lost a sizeable 1.2% against the Euro on the same day and due to the same US data (jobs and more on this later.)
The timing was not great for the £-€ slide after a strong recovery at the back-end of July, during what was a tough month. The pair is back to trading at one of the worst times since November 2023 and faces a risk event this week..
Usually in the build-up to a Bank of England interest rate decision, the Pound likes to take a dip (historically over 70% since records on this began). Sometimes a few days before, sometimes a couple of hours before and typically by around 0.4% (fair warning for you).
Almost 'everyone' is expecting a 25bp cut on Thursday which should already be priced into the Pound.
As inflation is rising, we may see a vote or two to hold rates. As unemployment is rising and the economy stagnant, we may see a vote or two to cut rates by 0.5%. This is why it's a risk event.
EUR
The Euro is giving back some of the gains it made on Friday to both the US Dollar and the Pound.
It was/is most certainly in 'overbought territory' after storming ahead following the US jobs data. As a favoured safe-haven currency, the Euro was picking up the pieces after global stocks were routed on the first day of August following a shift in financial market risk sentiment.
There is nothing of note due out from the Euro-Zone this week.
USD
The US jobs market is officially cooling and no longer just showing signs of it happening. The world's largest economy is no longer as robust as once assumed.
The latest jobs data seems to vindicate President Trump who has persistently accused the Fed of being too slow to recognise the need for lower interest rates (including a slowing economy).
The Federal Reserve has a dual mandate of both controlling inflation and supporting jobs.
Inflation has been heavily focused on for obvious reasons over the last 4-years, but with it being seemingly 'under control' for some time, job security will likely now take centre stage after the latest data (to Trump's relief).
This means almost a 100% certainty rate of a Fed interest rate cut next month after holding for 5 consecutive meetings. A lower interest rate will see the USD lower and interest rates will continue to fall until job preservation and economic resilience are once again at more stable levels.
Please check out the main events of the week below..
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