Running the risk of sounding like a broken record, the U.S. dollar is under pressure again this morning.
Overview
Global equities shook off an indifferent day yesterday and are solidly higher this morning. U.S. equities show major indexes will open up again today even as traders awaited a historic jobs report.
The headline print of Non-Farm payrolls was very surprising, and we are still scratching our heads. According to the Labor Department, the U.S. economy added 2.5M jobs in May, destroying estimates of a fall of 7.5M jobs. The unemployment rate rose to 13.3%, up from 14.7% in April and much better than the estimate of 19%.
While there is plenty to like in today’s print, it has been pointed out that much of the job gains were jobs that were temporarily laid off meaning that further gains might be more difficult. While the report was better than expected, we need to put it into context somewhat. The peak unemployment rate during the Great Recession was 10%. Nevertheless, equity markets love the data and stock futures have shot up an additional percent in the minutes following the report.
Overall, the dollar is headed for its third weekly loss and its trading a multi-month lows versus most of its G10 counterparts.
What to Watch Today…
- No major events scheduled for today
Complete Economic Calendar can be found here.
HAPPY HALF-HOUR: Join us Thursday…
EUR
The Euro tested fresh highs against the U.S. dollar overnight before paring those gains. Nevertheless, the common currency is up over 4% since May 26th. The latest bout of strength came after Bundesbank said that the German economy, the largest in Europe, has passed the trough of its coronavirus recession. The central bank also said the economy is starting to grow again and praised the governments new fiscal spending package. We credited part of the Euro’s recent rally to the same stimulus package
Some technical analysts have warned that the Euro’s rapid rise may be overdone and may be due for a correction in the coming weeks. While the EUR/USD has risen faster than we had thought too, we agree with the general direction of Euro strength and moderate dollar weakness.
CAD
The Canadian dollar and other commodity-based currencies rose against the U.S. dollar overnight as the price of oil extended its gain from May. Indeed, the price is on track for a sixth weekly gain. The recent pop higher came on news that OPEC+ will likely agree to more production cuts at their meeting this weekend. Cuts are expected to be extended until the end of July.
It was also jobs day in Canada and our northern neighbors were also able to surprise to the upside. Canada added 289,600 jobs in May. Economists had expected payrolls to contract 500K and the unemployment rate rising to 15%.
