Here is what you need to know on Monday, September 9:
The US Dollar (USD) stays resilient against its major rivals at the beginning of the week as investors refrain from taking large positions ahead of this week's key events, which will include US inflation data and the European Central Bank's (ECB) monetary policy announcement. Sentix Investors Confidence for the Eurozone and July Consumer Credit Change for the US will be featured in Monday's economic calendar.
After coming under bearish pressure with the immediate reaction to August employment data from the US on Friday, the USD Index benefited from risk aversion heading into the weekend ended the day in positive territory. Wall Street's main indexes declined sharply, with the Nasdaq Composite losing 2.7% on the day. Early monday, the index continues to edge higher toward 101.50 and US stock index futures were rising between 0.4% and 0.6%.
The table below shows the percentage change of US Dollar (USD) against listed major currencies last 7 days. US Dollar was the strongest against the New Zealand Dollar.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | -0.09% | 0.26% | -1.93% | 0.62% | 1.55% | 1.59% | -0.26% | |
EUR | 0.09% | 0.37% | -1.87% | 0.68% | 1.65% | 1.67% | -0.18% | |
GBP | -0.26% | -0.37% | -2.23% | 0.30% | 1.26% | 1.33% | -0.57% | |
JPY | 1.93% | 1.87% | 2.23% | 2.56% | 3.59% | 3.73% | 1.64% | |
CAD | -0.62% | -0.68% | -0.30% | -2.56% | 0.96% | 0.97% | -0.87% | |
AUD | -1.55% | -1.65% | -1.26% | -3.59% | -0.96% | 0.00% | -1.80% | |
NZD | -1.59% | -1.67% | -1.33% | -3.73% | -0.97% | -0.01% | -1.82% | |
CHF | 0.26% | 0.18% | 0.57% | -1.64% | 0.87% | 1.80% | 1.82% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
The US Bureau of Labor Statistics reported that Nonfarm Payrolls rose 142,000 in August. This reading came in below the market expectation of 160,000. Additionally, July's increase of 114,000 got revised down to 89,000. Other details of the jobs report showed that the Unemployment Rate edged lower to 4.2% from 43%, while the annual wage inflation, as measured by the change in the Average Hourly Earnings, rose to 3.8% from 3.6%.
EUR/USD spiked to a weekly high above 1.1150 in the American session on Friday but reversed its direction to close the day in the red below 1.1100. The pair stays on the back foot in the European morning and declines toward 1.1050.
GBP/USD struggles to find a foothold early Monday and trades a few pips below 1.3100 after ending the previous week virtually unchanged. The UK's Office for National Statistics will release UK labor market data on Tuesday.
USD/JPY registered losses for the fourth consecutive day on Friday and touched its lowest level in a month below 142.00. The pair stages a rebound to start the week and trades above 143.00. Japan's ruling Liberal Democratic Party (LDP) official and candidate running in the party's leadership race, Sanae Takaichi, said on Monday that Japan's inflation, when excluding external factors, was still weak.
Gold turned south in the late American session on Friday and closed the week slightly below $2,500. XAU/USD continues to stretch lower on Monday and was last seen trading slightly below $2,490.
Labor market conditions are a key element in assessing the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels because low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given their significance as a gauge of the health of the economy and their direct relationship to inflation.