US Dollar Pauses After Mixed NFP and PBOC Statement

Market Reviews

The US dollar is trading lower after today’s employment data. The USD also weakened across the whole spectrum of the market after the Central Bank of China announced its intention to adjust the reserve requirements ratio to 20%.

The People’s Bank of China (PBOC) said that it raises the “foreign exchange risk reserve ratio of forward sales from 0% to 20%, effective August 6, 2018. According to the statement, it’s an act to “prevent macro financial risks, promote the stable operation of financial institutions, and strengthen macro-prudential management.”

Mixed US NFP report gave no boost to the greenback. US non-farm payroll grew 157k in July, below expectation of 193k. But prior month’s figure was revised up from 213k to 248k. Unemployment rate fell back to 3.9%, as expected. Average hourly earnings grew 0.3% mom, matched expectation. Also from US, trade deficit widened to USD -46.3B in June, slightly higher than expectation of USD 3.1B.

Euro is still weak after Services PMIs and retail sales data. Eurozone PMI services fell to 54.2 in July, from 55.2. PMI composite was finalized at 54.3, down 0.6 from June’s 54.9. German PMI composite was a 4-month high of 55.0. France PMI composite was at a 2-month low of 54.4. Spain PMI composite hit 56-month low at 52.7. Eurozone retail sales grew by 0.3% mom in June, below forecast of 0.4% mom.

British pound remains under pressure of Services PMI and yesterday’s rate hike of the Bank of England. The IHS Markit/CIPS UK Services Purchasing Managers' Index (PMI) dropped to 53.5 in July from 55.1 in June and marked a three-month low. Meanwhile, IHS Markit's all-sector PMI, which includes services as well as the manufacturing and construction sectors, fell to 53.8 in July from 55.0 in June.