Dollar rebounds after mixed employment data

USD

The dollar recovered on Friday after Non-Farm Payrolls came out mixed but slightly better-than-expected, showing a 175k rise in people gaining jobs in May versus the 163k expected from 165k previously -although the downward revision to 149k was a big negative. This surprised investors as yesterday's spike lower in the dollar had been partly due to concerns that the NFP data today would be very disappointing. Nevertheless the exchange rate didn't recover to Wednesday's level either, showing continued underlying dollar weakness. Other data was not so rosy - with the Unemployment Rate rising to 7.6% from 7.5% further increasing the likelihood that the Fed policy would remain accommodative (6.5% being the target rate). Change in Manufacturing Payrolls fell by -8k when it was expected to rise to 4k. Average Hourly Earnings pulled back a little as well, rising by only 2.0% which was below the 2.1% expected; m/m it failed to rise altogether, when forecasts had been for a 0.2% increase. Nevertheless there was a slight improvement in average weekly hours worked, which rose to 34.5 from 34.4 after raising concerns last month when it fell by 2 whole basis points.


EUR


The euro traded mixed on Friday, falling slightly versus the dollar, but rising against the pound and the yen. On the data front the German Trade Balance in April showed an above-expectations result of 18.1bn when it had been expected to fall to 17.0bn from 18.8bn previously. The Current Account had also been expected to fall to 13.0bn, but instead remained high at 17.6bn from 20.4bn previously. German Exports showed a significant 1.9% rise m/m in April versus the fall to 0.1% which had been expected. Imports also rose by 2.3% from a revised down figure of 0.7% previously. German Labour Costs rose slightly by 1.1% q/q and 3.9% y/y. German Industrial Production rose by a higher-than-expected 1.0% from -2.4% previously, and 1.8% m/m from 1.2% previously when a fall to 0.00% had been forecast.


GBP

The pound weakened on Friday after the dollar rebounded as data showed more-people-than-expected gained work in May. U.K data meanwhile showed the Trade deficit in April fall to -2.6bn from -3.2bn when it had been expected to shrink to -3.0bn. Further data showed that inflation expectations remained higher, after a BOE survey showed Britons expected inflation to rise to 3.6% over the next 12 months – the same figure as in the last survey 3 months ago. Recent figures showed inflation ease to 2.4%. Continued high expectations are likely to curb further the likelihood the BOE will raise asset purchases at one of its future meetings.


JPY

The yen reversed previous gains on Friday – strengthening in the first part of the day after U.S treasury yields plummeted making the yen relatively more attractive to investors but then weakening and falling in the second half to end the day near where it had started and showing potential for a reversal into next week. On the data front the Leading Index rose to 99.3 from 98.0 when it had been expected to climb to 98.8. The Coincident Index - a measure of current business activity made up of a composite of indicators which track business activity - rose to 94.8 from 93.8 previously when it had been expected to rise to 94.9. Official Reserve Assets in May fell to $1250bn from 1258bn previously.