The US economy continues to recover, and it seems that the pace of this process will only increase. Another question is whether it will be energetic or not.
The recent data on employment in America presented on Thursday turned out to be unexpected and noticeably more positive than predicted. The US economy received 4.8 million jobs in June against the forecast of an increase of 3,000,000. What is more important is that the May value of the indicator was revised upwards to 2,699,000. In addition, the figures for the unemployment rate, which declined to 11.1% against the expectation of a decrease to 12.3% from 13.3%.
Against this background, we have weak data on average hourly wages and trade surpluses. The hourly wages declined in annual terms to 5.0% against expectations of 5.3% and the level of 6.6% a year earlier. On a monthly basis, it declined by 1.2% in June, with a forecast of a decline of 0.7% and a May value of -1.0%.
The US stock market expectedly rose by employment values, virtually ignoring weak average hourly wages and trade surpluses. Investors were clearly interested in the very prospect of economic activity recovery through employment growth, which will lead to higher wages in the future and, in general, to improve the situation in the country's economy, unless, of course, the situation with COVID-19 emerges, which the American authorities themselves admitted. will not lead to a new, even more severe wave of crisis in the country.
The currency market responded to NFP data with a local strengthening of the dollar. It seems that investors have traditionally decided to respond to a strong report from the labor market with dollar purchases, but the situation has already begun to change with the opening of trading in America, when everything returned to normal.
Market participants expectedly chose more important statistics for themselves – unemployment and made decisions based on them. This is due to the fact that it is the situation on the labor market that is the basic guideline that allows us to demonstrate the process of economic recovery in the broad sense of normalizing the state of the economy after its forced closure due to the coronavirus pandemic in the spring of this year.
Assessing the shift of the market focus from COVID-19 to the fact that the American economy is recovering, it can be assumed that this scenario will cause a gradual weakening of the function of the dollar as a safe haven currency and the beginning of its global decline due to the transformation of its current protective asset function into a funding currency. In many respects, such a development scenario will be similar to what was noted after the acute phase of the 2008-09 crisis. As for its possible dynamics in the currency market in the near future, it can be argued that its weakening may continue next week if the topic of COVID-19 does not come up again with renewed strength.
Today is a holiday in the United States, so we do not expect noticeable dynamics in world markets, including foreign exchange.
Forecast of the day:
The EUR/USD pair is trading in the range 1.1165-1.1350. We consider it a priority to buy a pair from the bottom of the range.
The GBP/USD pair is also consolidating in the wake of the absence of American investors in the market due to a weekend in the United States. If the pair declines below the level of 1.2450, it may continue to decline to the level of 1.2345.
