US dollar: outlook for July 11-17
US Nonfarm Payrolls added 287K in June, beating the forecasts of 175K increase. May growth, however, has revised to the downside, from 38K to 11K. This made 3-month average at 147K. The unemployment rate increased more than expected (from 4.7% to 4.9%), while the monthly growth of average hourly earnings – an important measure of inflation – missed the expectations slowing down from 0.2% to 0.1%. Still though annual wage growth is at its highest since the Great Recession.
All in all, US data were mixed, but mostly positive. Before the release the futures market wasn’t pricing in a rate hike until February 2019. The Federal Reserve will likely remain on hold in the coming months because of external risks created by Brexit. Yet, as concerns about American labor market disappear, traders may start thinking that the Fed may raise rates a bit earlier than in 2019. This should help the US dollar against the major currencies, especially those of them, whose central banks may further ease monetary policy.
At the beginning of the next week pay attention to the speeches of the Federal Reserve’s members George on Monday and Bullard on Tuesday – these will be the first comments of the US central bank after the fresh NFP figures. Also watch American producer prices on Thursday and consumer prices, retails sales and consumer sentiment on Friday. These figures will allow the market to update its view on the US economic outlook and the Fed’s interest rates.