The USD weakened on Friday afternoon after mixed US employment numbers.
The US Non-Farm Payrolls figure massively missed expectations with data showing they only added 235k jobs in August versus forecasts for 750k. This was the lowest number since Jan 2021. Despite this, US wage numbers did increase due to reduced work force and the unemployment rate fell to 5.2%. This data supports the more dovish members of the Federal Reserve and pushed back investors’ expectations about the likelihood of any tapering of interest rates until the end of 2021.
The UK and EU are still disagreeing over the Northern Ireland Protocol and this prompted some selling of both the Pound and Euro during the Asian trading session this morning. Brexit is also being blamed for labour and food shortages in the UK, negating some of last week’s gains in UK trading today. Although, economic data out of the UK suggests the economy is recovering as expected and markets are hopeful for a positive monthly July growth numbers (GDP) out later this week. It is Labor Day in the USA so markets expect relatively range bound trading today with little data.
As a result, the GBP/USD rate almost hit a 4-high on Friday evening but has since settled half a cent lower. The EUR/USD moved to the highest levels since the end of July. The GBP/EUR continues to trade at subdued levels and within a very tight range (a 60-pip range in the past 10-days).
The key events to watch this week are the European Central Bank’s interest rate meeting on Thursday, where QE tapering could be back on the table, and UK GDP figures on Friday.