The U.S. Dollar slumped against the majority of its Forex counterparts subsequent to the release of disappointing data on Friday, when non-Farm Payroll reports showed that only created 209,000 jobs in July while the level of Unemployment ticked up to 6.2 percent. Other reports showed that personal incomes stayed unchanged although spending went up slightly from 0.2 to 0.4 percent. Despite the mixed data, economists pointed to the fact that the employment sector posted a sixth month of improvements. The CFTC considers that the employment market will probably continue to offer signs of progress. So what are the markets focusing on now? This week, most eyes will be on the European Central Bank's policy meeting, China's Trade Balance news, and the rate decision by the Reserve Bank of Australia. The economic calendar shows that the central banks of England and Japan are also scheduled to hold their policy meetings; however, most analysts anticipate no changes at this time. Later this month, the Federal Reserve will hold the yearly meeting at Jackson Hole, Wyoming. Traders predict that the monetary authorities may discuss the likelihood of raising the borrowing costs sooner than planned given the solid growth metrics issued recently; however, there are those who doubt this will be the case since the Jobs sector has not fully recovered. It's no surprise that the greenback declined after such soft reports. But on Monday morning, the currency firmed up against a number of majors. Gold prices bounced back by almost 1 percent and contracts for December delivery surged to $1,294.80 a troy ounce on the Comex. Expert traders anticipate that the shiny metal could stagnate until the European Central Bank meets late this week.
The Euro rebounded after the publication of employment reports out of the U.S., but has dropped since then in anticipation of the European Central Bank policy meeting. Market traders predict that the Euro could stay to the downside until officials deliver a decision. Spain posted positive data on Unemployment, while in Portugal, the news was not as positive. According to sources, the central bank of Portugal is now in control of Banco Espirito Santo, which is now expected to leave bond holders with major losses. Most analysts say that this intervention could affect the money market. The British Pound is still trading near the lowest rate in over a month against the greenback due to less than stellar data out of the U.K. denoting a decline in Construction activity. And while the Bank of England is scheduled to meet this week, traders predict that the borrowing costs will remain at the current low. The Swiss Franc traded little changed against the U.S. monetary unit despite the fact that Swiss SVME went up to the highest level in three months. The SVME PI gauges the level of activities in Manufacturing.
The Yen has remained under pressure as many experts are hoping the Bank of Japan will expand stimulus to bolster growth. Many analysts say that the bank's officials could downgrade their growth predictions and a number of think-tanks anticipate that the economy will denote contraction of perhaps an annual rate of 7.4 percent for the second quarter.
The Australian Dollar benefitted from stellar Retail Sales and Job Advertisement metrics; however, it was weighed down by soft reports out of China which showed that Non-Manufacturing PMI slowed in July. New Zealand's Dollar dipped to the downside versus the greenback after Friday's disappointing figures on U.S. employment.
EUR/USD- Spain Provides Positive News
The EUR//USD weakened on Monday after sustaining gains in the past week. The pair remained on a downward trend as news out of Spain showed that the number of unemployed persons went down, but it did not drop as much as hoped for. Economists say that the attention will now shift to today's announcements on E.U. PMIs. The Manufacturing PMIS are key fundamentals since they offer an insight into the health of the overall economy. The EUR/USD went down to an almost eight-month low as investors placed trades anticipating the pair could continue to go down before the central bank's policy meeting. Other data revealed that the Index which measures confidence in the Euro-zone fell from 10.1 to 2.7 in August, while it was predicted to dip to 9.
GBP/USD- Construction Slows
The GBP/USD traded low on Monday after official releases indicated that the British Construction Purchasing Manager's Index went down to 62.4 after coming in at 62.6 in June. While the numbers revealed a slight decline in July, they were higher than expected. Economists say that the report was not negative since it denoted growth at a quick pace, and added that the real estate market is performing better than other sectors of the economy. June's production metrics were the best in more than ten years. Furthermore, sharp boosts in activity led to increases in employment. This is a busy week in the financial markets, and many traders will be looking at the Pound. Analysts believe that today's Services PMI could reverse the trend for the GBP/USD. The Bank of England will hold its monetary policy meeting. The bank's governor, Mark Carney intimated that an unemployment rate of less than 6 percent could prompt the authorities to boost the borrowing costs. Should officials offer bullish comments after the meeting, it's likely that the GBP/USD could erase losses.
EUR/JPY- Portugal Makes Headlines Again
The EUR/JPY traded mixed though it appeared that the pair could decline as Portugal made the headlines once again. Reports showed that the Portuguese banking crisis may be worsening, and this, together with the sanctions levied against Russia could have an impact on any Euro crosses. Releases out of Japan showed that the country's economic improvement may have stalled, especially since activities in the Industrial sector tanked. Furthermore, salaries have not improved. With this in consideration, economists predict that the Gross Domestic Product could come in with disappointing figures showing a contraction after jumping 6.7 percent in the initial quarter of 2014. Given the fragile state of the economy, the Bank of Japan could change its stance and copy the Federal Reserve's strategies by unveiling new stimulus measures. Analysts predict that since the situation in the Ukraine is heating up, and the Russian economy is already feeling the effects of the sanctions, the Euro-zone could also begin to feel the impact in a negative way.
AUD/USD- Retail Sales Up
The AUD/USD went up, but gains were kept in check as China announced that activities in the Non-Manufacturing area declined in June. The Purchasing Manager's Index posted at 54.2 percent for July, which means it came in 0.8 percent lower than in June. This index measures the level of activities in a number of sectors including aviation, construction, real estate and railroad transportation. The pair is expected to experience some volatility this week as the Reserve Bank prepares for its policy meeting. The economy of this South Pacific nation is seen as fragile as it tries to transition from being dependent on mining to domestic consumption. In the past week, reports showed that Building approvals fell 5 percent in June. However, Monday's releases indicated that Retail Sales climbed 0.6 percent in June, and Jobs Ads surged 0.3 percent last month.
Today's Outlook
Today's economic calendar shows that Australia will report on the Interest Rate Decision and will issue the RBA's Rate Statement. The Euro region will publish Services PMI and Retail Sales. The U.S. will announce Factory Orders, Services PMI, and ISM Non-Manufacturing PMI. New Zealand will deliver data on Employment Change and the Unemployment Rate.