United States of America

USD weakens against EUR and JPY but strengthens against GBP.

Investors focused on the July labor market data, worse than experts expected. Unemployment rose from 4.1% to 4.3%, employment increased by 114.0K compared to the previous forecasts of 176.0K and 179.0K, and average hourly earnings changed from 0.3% to 0.2% MoM and from 3.8% to 3.6% YoY. Traders fear the US Fed officials made a mistake by not cutting interest rates in July. The economy may slow more seriously than expected and even enter a recession. Therefore, the expected size of the reduction in borrowing costs this year has changed. After the regulator’s meeting, it was assumed that the indicator would decrease by 90 basis points but now, the adjustment may amount to 125 basis points. Yesterday, the head of the Federal Reserve Bank of Chicago, Austan Goolsbee, said that officials would not react sharply to the latest labor market data but their further actions would be even more balanced.

Eurozone

EUR is weakening against JPY but strengthening against USD and GBP.

The July services PMI fell from 52.8 points to 51.9 points, meeting expectations, and the composite PMI from 50.9 points to 50.2 points against the forecast of 50.1 points. German indicators changed from 53.1 points to 52.5 points and from 50.4 points to 49.1 points, respectively. Overall, the region’s economy is recovering, albeit more slowly than before, in line with the European Central Bank’s (ECB) conditions for further interest rate cuts. On the other hand, the June producer price index rose from –0.2% to 0.5%, exceeding expectations by 0.1%, MoM, and from –4.1% to –3.2% YoY. At the same time, the Sentix investor confidence indicator for August corrected from –7.3 points to –13.9 points, instead of increasing to –5.5 points: most traders expect a significant deterioration in the economic situation in the Eurozone in the next six months.

United Kingdom

GBP weakens against EUR, JPY, and USD.

The currency is under pressure despite the macroeconomic statistics. Services PMI rose from 51.1 points to 52.5 points, exceeding the forecast of 52.4 points, and the composite PMI from 52.3 points to 52.8 points. Experts note that the increase in the volume of new orders and the growth of employment in the industry was a consequence of positive investor expectations from the coming to power of the Keir Starmer government. The statistics increase the likelihood of further recovery of the national economy. However, against it, the Bank of England may postpone further easing of monetary policy since the risks of new price growth in the non-manufacturing sector remain.

Japan

JPY is strengthening against EUR, GBP, and USD.

The minutes of the latest meeting of the Bank of Japan were generally “hawkish”. The officials agreed that the recent yen’s fall is one of the factors contributing to the growth of inflation and requires close attention when determining further monetary policy. Also, two of the nine board members called for an early increase in interest rates. In addition, the July service PMI increased from 49.4 points to 53.7 points, returning to the positive zone, and the composite PMI from 49.7 points to 52.5 points, confirming the recovery of the national economy, in which case the likelihood of further tightening of current monetary parameters will increase significantly.

Australia

AUD is weakening against EUR and JPY but has ambiguous dynamics against USD and GBP.

The July service PMI fell from 51.2 points to 50.4 points against the forecast of 50.8 points, and the composite PMI from 50.7 points to 49.9 points, entering the stagnation zone. The negative dynamics of the indicators reduce the likelihood of a new tightening of the monetary policy of the Reserve Bank of Australia (RBA) even in the context of high inflation in the country. At tomorrow’s meeting, the officials may keep the interest rate at 4.35% but send investors signals about further actions.

Oil

The decline in oil prices has given way to growth.

The market remains under the influence of two main opposing factors. It is under pressure due to the July data on the US labor market, which reflected its cooling and caused fears of a slowdown in the country’s economy with a corresponding decrease in demand for energy. On the other hand, the trading instrument is supported by the likelihood of a direct military conflict between Israel and Iran, as well as a complete suspension of production at Libya’s largest oil field, Sharara, amid geopolitical tensions.