US Dollar Rallies Higher as Unemployment Rate Dip Beats Expectations

Solid Retail Sales Offer Support to Australian Dollar

A slight miss from July’s retail sales data failed to put much of a dampener on the Australian Dollar on Friday.

As sales saw growth of 3.2% on the month, as opposed to the forecast 3.3%, this still encouraged investors to adopt a more positive outlook. This solid uptick in sales suggests that consumer sentiment continued to recover in July, despite the fresh signs of slowdown elsewhere in the economy.

However, any signs of a slowdown in August’s Chinese trade data could weigh heavily on the Australian Dollar as market confidence weakens once again.


Pound Slips Further as BoE Policymaker Strikes Dovish Tone

Comments from Bank of England (BoE) policymaker Michael Saunders put renewed pressure on the Pound heading into the weekend.

Saunders took a distinctly dovish tone, noting his belief that further monetary stimulus is necessary and that the extent of the UK’s recovery may have been overestimated. Additionally, the underwhelming construction PMI reading left GBP exchange rates on the back foot.

The Pound could come under further pressure this week as the eighth round of UK-EU intensive Brexit talks resume, if progress appears to remain at a standstill Sterling is likely to suffer.


Weaker German Factory Orders Growth Softens Euro

German factory orders saw less growth in July than anticipated, limiting the appeal of the Euro.

While output still picked up 2.8% on the month, this proved disappointing in the wake of June’s far sharper uptick. And with the Eurozone economy showing signs of struggling to hold onto its initial bout of recovery momentum, there appears little reason for investors to favour the single currency at this stage.

A softer German industrial production reading could keep EUR exchange rates in muted territory this afternoon. Later in the week, the third estimate of Eurozone second quarter GDP and the European Central Bank Rate Decision could weigh on Euro exchange rates.


US Dollar Jumps as August Unemployment Betters Forecasts

Although the headline US non-farm payrolls figure fell short of forecast, this was accompanied by a bigger-than-expected drop in the unemployment rate.

This encouraged the US Dollar to trend sharply higher across the board as unemployment fell from 10.2% to 8.4%. While the labour market still showed signs of fragility, investors were quick to shrug off any doubts in favour of piling into the safe-haven USD.

However, with US markets closed to mark the Labour Day bank holiday, the US Dollar may struggle to hold onto its bullishness today.


Unemployment Rate Miss Limits Canadian Dollar Demand

Resurgent market risk aversion saw the Canadian Dollar falter during Friday’s European session as demand for safe-haven assets picked back up.

August’s unemployment rate missed forecasts, meanwhile, clocking in at 10.2% rather than 10.1%. Even though this was accompanied by an improvement in average hourly earnings investors were still discouraged by the report, leaving CAD exchange rates biased to the downside.

A lack of fresh Canadian data could see the Canadian Dollar lacking in any significant momentum in the near term.


Fading Market Confidence Dents New Zealand Dollar

The latest bout of US Dollar strength put pressure on the risk-sensitive New Zealand Dollar ahead of the weekend.

With market confidence in the strength of the global economy’s initial recovery from Covid-19 disruption fading, NZD exchange rates were left with little in the way of support.

Unless a sense of confidence returns to markets today, the New Zealand Dollar is unlikely to find a major rallying point.

Louisa Heath