Foreign Exchange Market Update

May 7, 2021

United States (US): Growth Falls Well Short Of Estimates

Employment in the US increased by far less than expected in the month of April, according to a closely watched report released by the Labor Department on Friday. The report said non-farm payroll employment rose by 266,000 jobs in April after surging by a downwardly revised 770,000 jobs in March. Economists had expected employment to spike by 978,000 jobs compared to the jump of 916,000 jobs originally reported for the previous month. The job growth in April was largely due to a sharp increase in employment in the leisure and hospitality sector, which added by 331,000 jobs as pandemic-related restrictions continued to ease in many parts of the country. Notable job growth was also seen in other services such as repair and maintenance and personal and laundry services as well as local government education. Meanwhile, the report also showed a steep drop in employment in temporary help services, which shed 111,000 jobs. Employment in couriers and messengers also slumped by 77,000 jobs. The Labor Department also said the unemployment rate inched up to 6.1% in April from 6.0% in March, while economists had expected the unemployment rate to drop to 5.8%. The unexpected uptick in the unemployment rate came as 430,000-person increase in the size of labor force outpaced the 328,000-person increase in the household measure of employment. The report also showed average hourly employee earnings climbed $0.21 or 0.7% to $30.17 in April. Annual wage growth still slowed to just 0.3% in April from 4.2% in March. The lagging labor market recovery suggests it will be many months before the Federal Reserve judges the economy has made substantial further progress towards its full employment goal. 05/07/2021 - 06:28AM (RTTNews)

United Kingdom (UK): GBP Extends Gains After Disappointing US Nonfarm Payroll Data

British Pound traded at 1.3994 against USD at 9:00 am PST. 

GBP has been extending its gains after the US Nonfarm Payrolls badly disappointed with an increase of only 266,000 jobs in April. Earlier, GBP benefited from the UK Conservative Party's gains in local elections. PM Johnson's Conservatives have won a by-election for the Northern seat, defeating the opposition Labor Party in its heartland. Such a victory provides some political calm. Counting in a long list of other local and regional elections is moving slowly, but speculation about Scotland's elections is set to increase. The pro-independence Scottish National Party is close to winning an absolute majority, paving the road for another clash with London over a new referendum. However, the sweep toward the ruling Tories south of the border may imply a pro-unionist majority up north. That would boost GBP. Investors prefer political stability over drama. GBP stabilized after BoE announced it would slow the pace of purchasing bonds but maintain the total buying plan unchanged. The initial reaction was positive, but the GBP retreated after BOE Governor Andrew Bailey insisted the move was not tapering. 05/07/2021 - 04:09AM (RTTNews)

Japan: Services PMI Improves To 49.5 In April

Japanese Yen traded at 108.53per USD at 9:00 am PST. 

The services sector in Japan continued to contract in April, albeit at a slower pace, the latest survey from Jibun Bank revealed on Friday with a services PMI score of 49.5. That's up from 48.3 in March, although it remains slightly below the boom-or-bust line of 50 that separates expansion from contraction. This marked the slowest contraction in activity in the current 15-month period of decline. The latest reduction was only modest overall, as firms faced softer restrictions in the first half of April. Demand broadly stabilized in the latest survey period. This pushed the seasonally adjusted New Business Index to the highest level since January 2020, with some service providers noting that the lifting of restrictions supported improved sales during April. The report also showed that the composite index moved to expansion with a reading of 51.0, up from 49.9 in March. 05/07/2021 - 12:43AM (RTTNews)

China: Services PMI Climbs To 56.3 In April

Onshore Chinese Yuan traded at 6.4332 per USD and offshore Chinese Yuan traded at 6.4221 per USD at 9:00 am PST.

The services sector in China continued to expand in April, and at a faster pace, the latest survey from Caixin revealed on Friday with a services PMI score of 56.3. That's up from 54.3 in March, and it moves further above the boom-or-bust line of 50 that separates expansion from contraction. The faster upturn in business activity was linked to the successful containment of COVID-19 and a further improvement in demand conditions. Total new orders expanded at the fastest rate since last November and sharply overall. The steeper rise in sales was also supported by a renewed upturn in export work. New business from abroad rose solidly overall, after a two-month period of decline. Firmer demand conditions led companies to raise their staffing levels for the second month running in April. Moreover, the rate of job creation was the fastest recorded for five months and solid. Looking ahead, services companies in China were strongly optimistic that business activity would be higher than current levels in 12 months' time. The report also showed that the composite index moved up to 54.7 from 53.1 in March. 05/07/2021 - 02:53AM (RTTNews)

Canada: CAD Moves Up Due To Canadian Job Data

Canadian dollar traded at 1.2146 per USD at 9:00 am PST.

Canada labor market figures have smashed expectations in both February and March with the latter coming out at 303,100, more than triple the expectations. But a resurgence of COVID-19 in the northern nation may have hurt hiring. Canada is set to report a substantial loss of jobs in April, but there are reasons to expect the outcome would be better. The nation's labor market figures have been volatile, and that is one expectation to why economists expect a loss of 175,000 positions in May. Canada is vaccinating its population, like its peers. Better prospects of the near future boost business confidence and could already be triggering more hiring than economists expect. The US economy is booming thanks to immunization and massive fiscal stimulus. The economic calendar is pointing to a surge of nearly one million jobs in America. As 75% of Canadian exports go south there is a good reason to think that the rapid US expansion would also cause hiring in Canada. Moreover, oil prices gradually increased in April, potentially causing the industry to bring more people on board. The forecasts seem too gloomy, and any upside surprise could move CAD higher. It would join the Bank of Canada's announcement of tapering bond buys, a surprising move that already sent the CAD higher. 05/07/2021 - 05:58AM (RTTNews)