US Payroll Data Shows Economy Shedding Less Jobs Than Expected, Dollar Boost Short Lived

Daily Forex Fundamentals | Written by CMS Forex | Aug 01 08 20:21 GMT |

AUS Manufacturing Down In July, Inflation Shows Signs of Cooling In Australia the manufacturing PMI posted a 46.9 for July, the second straight month that activity contracted. The slower domestic economy, higher interest rates and softness in housing construction all weighed on activity. These factors are being compounded by weaker global growth, rising costs and the high Australian dollar. Inflation at least seemed to cool in July, with the annual rate of inflation, as measured by the TDMI gauge, falling to 4.6%. That's a welcoming sign for the central bank which is betting a moderation in growth will work to soften price increases. AUD/USD - Aussie Continues its Slide As Rate Cuts Factored Into Price The Aussie-US Dollar pair continued to tumble as traders increase speculation that the Reserve Bank of Australia will move to cut rates sooner rather than later. Policy members do not want what began as a moderation in growth to turn into a serious slowdown. The pair fell about 100 pips this session and is down 280 pips from its high for the week near .96. GER Retail Sales Fall 1.4% in June, Sharper Than Expected Retail sales in Germany fell 1.4% in June, more than double what economists expected. On the year sales were down 3.9%. The report highlights how weak consumer confidence and high inflation are choking spending and Euro-zone growth numbers are set to be much weaker in the 2nd quarter compared to the 1st. EUR and UK Manufacturing Declines in July Manufacturing activity in both the Euro-zone and the UK contracted in July as both economies succumb to the US-led global slowdown. The UK figure was the lowest since December 1998. EUR/CHF - As European Stocks Weaken Today, So Does Euro vs Franc The Euro-Swiss Franc pair fell as European stocks stumbled in Friday overnight trading. From its high yesterday around 1.6360 the pair tested 1.6290 a slide of 70 pips. GBP/JPY - Pound Falls to Yen as UK Stocks Fall Dimming Risk Appetite for Carry Trade Stocks in the UK fell as well, and the Pound-Yen pair fell through support near 213.50 overnight. From yesterday's high the pair slid as much as 240 pips to test the 212 level, but recovered slightly as NY trading got under way. US Economy Sheds 51K Jobs, Better Than Forecast, Unemployment Rate Increases to 5.7% The US economy shed 51K jobs in July, the seventh straight month of job losses. The number was better than forecast and gave the Dollar a boost in the minutes following the release. The unemployment rate increased to 5.7% from 5.5%, surprising forecasts on the upside. US ISM Manufacturing Index at 50, Construction Spending Falls The US manufacturing activity posted a reading of 50 in July, indicating that hte activity leve was flat. Most of the positive contribution came from the employment sub-index as new orders and deliveries fell. The prices paid component cooled somewhat as well. Construction spending fell 0.4% for June, and is down 5.9% on the year. EUR/USD - Knee Jerk Reaction to Payroll Data Pared Quickly The Euro-Dollar showed the knee-jerk reaction in favor of the Dollar following the payroll data, but those gains were quickly cut down as NY trading went on. For the week, the Dollar has moved from the 1.57 level to trade near 1.5550 as attention turns to next week's interest rate announcements from the Fed and the ECB. USD/JPY - Dollar Falls vs Yen on Economic News Last 2 Sessions, Oil Price Increase The Dollar-Yen pair drifted lower overnight and experienced choppy trading during the NY session. Oil prices staged a rally, increasing about $4 per barrel at one point, and the main US stock indexes were in the red. From a high near 108.30, yesterday the pair is down about 70 pips to trade near 107.60. 4 Central Bank Decide on Rates Next Week There are 4 central banks deciding on interest rates next week, the Reserve Bank of Australia, the Bank of England, the European Central Bank and the US Federal Reserve. Traders will be looking for clues as to future policy from the announcements. Capital Market Services, L.L.C. www.cmsfx.com ©C2004-2005 Globicus International, Inc. and Capital Market Services, L.L.C. Any information in this report is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Capital Market Services, L.L.C. with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. Capital Market Services, L.L.C. accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this report. No part of this report may be reproduced or distributed in any manner without the permission of Capital Market Services, L.L.C.