FX round-up: Pound rally against the dollar halted by strong NFP

Digital Look Sharecast | 07 Aug, 2017 18:25 - Updated: 18:25 | | |

Money pounds sterling

Sterling's climb to an 11-month high against the US dollar came to an abrupt halt on Friday with the release of the latest non-farm payroll figure from the US.

The release of the data showed that 209,000 jobs had been created in July, beating market expectations of 182,000, giving the US some room to breath after a month of mixed data.

As a result, sterling saw offers from 1.3150 to end the week at 1.3025. Kathleen Brooks, research director at City Index had this to say, "Friday's strong U.S. jobs data has given the dollar bears something to think about but we would have to see whether this trend can be sustained before we see large short dollar position unwinding."

Overnight, trading saw little change which was reflected in the UK session with the pair only managing a slight move lower on the day of 0.12% to 1.3021 by 1700 BST.

Bank of New York Mellon strategist Neil Mellor said, "We were suspicious about sterling getting up to the $1.32 level – we thought it was living on borrowed time. The market took the June MPC (monetary policy committee) vote and ran with it, and that looked a bit incongruous."

The euro also had a fairly lacklustre day of trading, managing to gain only 0.08% on the US dollar as at 1700 BST to trade at 1.1784.

Earlier in the day, David Madden from CMC Markets said, "The EUR/USD is eyeing the $1.18 mark and bargain hunters move in. Dealers clearly have confidence in the single currency as it is one of the few currencies that is higher against greenback today."

The week ahead sees little in the way of significant Eurozone announcements, shifting focus onto more dollar related events such as unemployment claims due on Thursday and CPI data scheduled for Friday.

Data on Monday showed the SNB's (Swiss National Bank) foreign currency reserves grew to 714.33 billion Swiss francs at the end of July, roughly a tenth bigger than the economy. The SNB is thought not to be behind the franc's latest decline as sight deposit levels have been flat in recent weeks.

Against the euro, the franc has lost nearly 5% since the start of July and currently trades at near its' weakest point since the SNB scrapped a currency cap of 1.20 in January 2015.

Peter Rosenstreich from Swissquote said, "The G10 banks, including the ECB, are all shifting towards normalisation while [...] the only central bank that is not going to tighten monetary policy any time soon and has the firepower to support an expansive policy is the SNB."

Swiss exporters are in one of the strongest positions they have been in for years as the Swiss franc continues to weaken against the euro.

Monday saw EUR/CHF range bound for the day (1.1461/1.1500) only managing a slight push higher on the day 0.18% to trade at 1.1475 by 1700 BST.

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