Here’s what you need to know on Friday, August 2:
After falling sharply during the Federal Reserve (Fed) event on Wednesday, the US Dollar (USD) staged a rebound but struggled to gain any bullish momentum following disappointing US data. The US Bureau of Labor Statistics will release the July employment report on Friday, which will include Non-Farm Payrolls (NFP), unemployment rate, and wage inflation figures.
US Dollar PRICE This week
The table below shows the percentage change of the US Dollar (USD) against the major currencies this week. The US Dollar was the strongest currency against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.58% | 1.25% | -3.08% | 0.25% | 0.58% | -1.00% | -1.33% | |
| EUR | -0.58% | 0.63% | -3.60% | -0.31% | 0.04% | -1.59% | -1.90% | |
| GBP | -1.25% | -0.63% | -4.24% | -0.96% | -0.59% | -2.20% | -2.50% | |
| JPY | 3.08% | 3.60% | 4.24% | 3.38% | 3.78% | 2.11% | 1.81% | |
| CAD | -0.25% | 0.31% | 0.96% | -3.38% | 0.36% | -1.28% | -1.56% | |
| AUD | -0.58% | -0.04% | 0.59% | -3.78% | -0.36% | -1.60% | -1.96% | |
| NZD | 1.00% | 1.59% | 2.20% | -2.11% | 1.28% | 1.60% | -0.31% | |
| CHF | 1.33% | 1.90% | 2.50% | -1.81% | 1.56% | 1.96% | 0.31% |
The heatmap shows percentage changes of major currencies. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you choose the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change shown in the chart will represent the USD (base)/JPY (quote).
The Bank of England (BoE) announced on Thursday that it has cut interest rates by 25 basis points (bps) to 5%. At the press conference after the meeting, BoE Governor Andrew Bailey struck a cautious tone and refrained from confirming further policy easing, helping the British Pound limit its losses. Early on Friday, GBP/USD remains under modest bearish pressure and falls towards 1.2700.
U.S. data showed on Thursday that weekly initial jobless claims rose to 249,000 in the week ended July 27 from 235,000 in the previous week. Meanwhile, the ISM manufacturing PMI fell to 46.8 in July from 48.5 in June, pointing to a continued contraction at an accelerating pace in manufacturing sector activity. The unemployment rate is forecast to remain unchanged at 4.1% in July and NFP is forecast to rise by 175,000 after the 206,000 increase recorded in June. Annual wage inflation, as measured by the change in Average Hourly Earnings, is expected to slow to 3.7% from 3.9%. Ahead of the labor market data, the ISM Manufacturing PMI is forecast to decline to 46.8 in July from 48.5 in June. United States Dollar (USD) remains stable above 104.00, while the 10-year US Treasury bond yield continues to decline after breaking below 4% on Thursday.
After a short-lived recovery attempt in the early Asian session, the USD/JPY turned south and fell below 149.00. The Japanese Yen seems to benefit from the Bank of Japan’s unexpected decision to raise interest rates earlier in the week. Meanwhile, Japan’s Nikkei 225 index is down nearly 6% on the day.
He EUR/USD failed to build on Wednesday’s recovery gains and fell to multi-week lows below 1.0800 on Thursday. The pair remains in a consolidation phase around 1.0790 on Friday morning.
He Gold XAU/USD closed unchanged on Thursday but managed to gain bullish momentum during Asian trading hours on Friday. At press time, XAU/USD was up more than 0.5% on the day, trading slightly above $2,460.
Nonfarm Payrolls FAQs
Nonfarm payrolls (NFP) are part of the U.S. Bureau of Labor Statistics’ monthly employment report. The nonfarm payrolls component specifically measures the change in the number of people employed in the U.S. over the previous month, excluding the agricultural sector.
The nonfarm payrolls figure can influence Federal Reserve decisions by providing a measure of how successfully the Fed is fulfilling its mandate of promoting full employment and 2% inflation.
A relatively high nonfarm payrolls figure means that more people are employed, earning more money and therefore likely spending more. Conversely, a relatively low nonfarm payrolls figure could mean that people are having difficulty finding work.
The Federal Reserve typically raises interest rates to combat high inflation caused by low unemployment, and lowers them to stimulate a stagnant labor market.
Nonfarm payrolls tend to have a positive correlation with the US Dollar. This means that when payrolls figures are higher than expected, the Dollar tends to rise and vice versa when they are lower.
The NFP influences the US Dollar through its impact on inflation, monetary policy expectations, and interest rates. A higher NFP typically means that the Federal Reserve will be tighter in its monetary policy, which supports the USD.
Non-farm payrolls typically have a negative correlation with the price of Gold. This means that a higher than expected payrolls figure will have a depressive effect on the price of Gold and vice versa.
A higher NFP usually has a positive effect on the value of the USD, and like most major commodities, Gold is priced in US Dollars. Therefore, if the USD gains value, fewer Dollars are needed to buy an ounce of Gold.
Moreover, higher interest rates (usually helped by a higher NFP) also reduce the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm payrolls are just one component within a larger employment report and can be overshadowed by the other components.
Sometimes, when nonfarm payrolls beat forecasts but average weekly earnings were lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the drop in earnings as deflationary.
The Participation Rate and Average Weekly Hours components can also influence market reaction, but only in rare cases, such as during the “Great Resignation” or the Global Financial Crisis.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
