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US dollar recovers from last week’s losses

Tuesday, July 09, 2024

Today’s headlines

What’s happening: The US dollar edged higher on Monday, after recording losses last week on soft economic data.

What happened: The greenback fell around 1% versus major peers last week after weak economic data fuelled speculations of the Federal Reserve lowering its benchmark interest rates soon.

The US dollar also moved higher versus the euro on Monday, as election results in France pointed towards a hung parliament.

Why it matters: Data released on Friday showed that the unemployment rate in the US increased to a two-and-a-half year high of 4.1% in June. The figure also came in higher than estimates of 4.0%, signalling a cooling labour market. Average hourly earnings rose by 0.3% to $35.00 in June, versus a 0.4% rise in the earlier month and below estimates of 0.4%.

The US NFP (nonfarm payrolls) report also showed 206,000 job adds in June. Although the figure topped market expectations of 190,000 job adds, it was lower than May’s reading of 218,000, which was revised lower from 272,000.

Other data also signalled weakness in the US services activity and private employment. Traders now widely expect the Federal Reserve to lower its benchmark interest rates in September and announce a second rate cut in December.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained more than 0.1% to 105 on Monday, after falling to a three-week low on Friday.

The EUR/USD forex pair lost more than 0.1% to reach 1.0826 on Monday, after declining to 1.07915 earlier in the session.

The USD/JPY forex pair settled at 160.83 on Monday. Data released on Monday showed average cash earnings in Japan rose by 1.9% year-over-year in May, the strongest reading since January and higher than the 1.6% gain notched in April.

The GBP/USD climbed to a three-and-a-half week high but pared gains later in the session. The forex pair lost around 0.1% to reach 1.2806 on Monday. The British pound started the week with high volatility after the Labour Party’s landslide victory in the UK election.

What to watch: Investors await the release of inflation reports from the US this week. The annual inflation rate in the US, which eased to 3.3% in May, is expected to fall further to 3.1% in June. Factory gate prices in the US, which fell by 0.2% in May, are projected to rise 0.1% in June.

The markets today

Crude oil will be in focus today ahead of the American Petroleum Institute’s stockpiles data

Context: Crude oil prices fell to a one-week low on Monday amid concerns over Hurricane Beryl weighing on US demand.

Details: Hurricane Beryl resulted in the closing of refineries at ports along the Gulf of Mexico. The hurricane brought heavy rainfall to the US state of Texas, resulting in the cancellation of hundreds of flights, while nearly 2 million homes and businesses lost power.

Mixed US employment data released last week also fuelled concerns around a slowdown in the US economy, the world’s biggest oil consumer.

Fuel consumption in India, the third largest importer of oil, increased by 2.6% year-over-year to 19.99 million metric tons in June. In Germany, exports declined much more than projected in May, following weak demand from the US, China and European nations.

The OPEC+ (Organization of the Petroleum Exporting Countries and its allies) announced the extension of most of its oil production cuts into next year.

Some strength in the US dollar also exerted some pressure on oil prices, as a higher greenback makes commodities more expensive for foreign currency holders.

Brent crude for September delivery slipped 79 cents to settle at $85.75 per barrel, while WTI crude oil for August delivery declined 83 cents to close at $82.33 per barrel on Monday.

In other energy trading, wholesale gasoline for August delivery slipped 2 cents to $2.54 a gallon, while August heating oil declined 2 cents to $2.58 a gallon. August natural gas bucked the trend and added 5 cents to $2.37 per 1,000 cubic feet during Monday’s session.

What to watch: Investors await the release of data on crude oil stockpiles from the API today. US crude oil inventories fell by 9.163 million barrels in the week ending June 28, compared to a rise of 0.914 million barrels in the prior week.

Data on crude oil inventories from the Energy Information Administration, due to be released on Wednesday, will also remain on focus.

Other Markets: European indices closed lower on Monday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 0.13%, 0.02%, 0.63% and 0.03%, respectively.

The news shaping the markets

At least 31 people were killed and 112 were injured across Ukraine in one of the biggest Russian missile attacks in months. The news sent the RUB/USD pair lower in forex trading this morning.


Australia’s NAB business confidence index rose to 4 in June, from -2 in May. The region’s business mood surging to its strongest level since January 2023 lent support to the AUD/USD forex pair.


The Philippines said its unemployment rate declined to 4.1% in May, from 4.3% in the year-ago month, sending the PHP/USD pair higher in forex trading this morning.


US consumer inflation expectations for the year ahead eased to 3% in June, from 3.2% in the prior month, which sent the Nasdaq 100 index higher by around 0.2% on Monday.


UK’s retail sales contracted by 0.5% year-over-year in June, compared to a 0.4% gain in May. However, the GBP/USD pair rose in forex trading this morning.

What else to watch today

France’s current account, US NFIB small business optimism index, Redbook index and Manheim used vehicle value index, Mexico’s consumer confidence indicator, consumer price index, auto exports and car output, as well as China’s vehicle sales.


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