European Majors Remained Soft Into Friday After ECB And BoE Meetings

The dollar remained firm as market focus turned to employment data from the U.S.
Economists expected the non-farm payroll report to show 162k job growth in June, while the unemployment rate was expected to drop to 7.5%. The ADP report showed larger than expected growth in private sector jobs by 188k in June, and the data supported a solid NFP the same month. Also encouraging was that the employment component of ISM services posted strong gain to 54.7 in June, even though the headline composite index dropped to 52.2. It should be noted that the ISM manufacturing employment dropped into contraction region of 48.7.

Another focus on Friday was the Canadian employment data which was expected to show -12.3k contraction in June. The unemployment rate was expected to be unchanged at 7.1%. Canada released the Ivey PMI, which was expected to drop to 59.6 in June. Other data wasSwiss foreign currency reserves and CPI m/m.

European majors tumbled overnight after ECB and BoE meetings, and remained soft into Friday. The ECB left the main refinancing rate unchanged at 0.5%, maintaining other unconventional monetary easing measures unchanged. The central bank pledged to "monitor all incoming information on economic and monetary developments and assess any impact on the outlook for price stability". New BoE governor Mark Carney left the Bank rate unchanged at 0.5% at his first meeting. He warned that the rise in yields is not warranted. As mentioned in the policy statement, "significant upward movement" in yields would put pressure on expectations for growth and inflation. Also, "the implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy". On the U.K.’s economic outlook, policymakers noted that "there have been further signs that a recovery is in train, although it remains weak by historical standards and a degree of slack is expected to persist for some time".

Concerning the political crisis in Portugal, Prime Minister Pedro Passos Coelho struggled to maintain the coalition government. After a meeting with his former foreign minister, Coelho stated that the two ruling parties have "found a formula to maintain government stability". He also affirmed that the government would "find the best solution for the crisis". The announcement sent the bond yields lower, which had surged as high as 8% during the mid-week.