04/09/2017 - US Labour Market Shows Further Slow Down

USD

The dollar realised significant losses on Friday but steadied later on in the session despite the release of weaker than expected U.S employment data. 
 
The report published by the U.S. Labour department showed that the economy created only 156,000 jobs in August. Analysts had originally expected the figure, which excludes the farming sector to show an increase of 179,000 from the previous month.
 
In addition, the unemployment rate, which was initially forecast to remain unchanged at 4.3% rose to 4.4%.  There was also an increase in average hourly earnings, which rose by less than expected to 0.1%. Markets were predicting a 0.2% gain.
 
Nonetheless, the losses were offset later on in the session after the Institute of Supply Management revealed that it’s manufacturing purchasing managers’ index ticked up from 56.3 in July to 58.8 last month.  The figure, which was only due to increase to 56.5, showed its highest reading since August 2011.
 
Although investors are well aware that the Fed closely monitors the strength of the labour market and wage-driven inflation, the rebound in the dollar following the weak data suggests that markets still see a third interest rate hike on the horizon before December.

GBP

Brexit secretary David Davis over the weekend accused the EU of playing “time against money” during Brexit negotiations as the bloc tries to exert pressure on the UK to agree a divorce bill, a major stumbling block in the talks on Britain’s split from the European Union.
 
Davis signalled that he would not allow the European Union to force the UK’s hand in the negotiations by using time pressures by saying money was “the thing that frightens them the most”.
 
David also told the BBC yesterday morning that Brussels has made itself look “silly” after it insisted that no progress has been made on key issues in the third round of the talks.  
 
Alongside the “Brexit bill”, the EU has stipulated that two other divorce issues, namely citizens rights and the Irish border, must be addressed before future trade arrangements are to be discussed October. 

Key Announcements

09:30 – GBP – Construction PMI; Forecast at 52.1 against a previous of 51.9