The dollar went downhill during the mid-European trading hours as the widely expected and Fed’s closely watched indicators, nonfarm payrolls and earnings, came in worse than expected in August but managed to recover on upbeat manufacturing PMI readings. The euro hit lower while the dollar was rebounding but did not show significant reaction to the less hawkish remarks made from ECB officials on Friday.
While analysts expected nonfarm payrolls to increase by 180,000 in August, the actual number popped up far below expectations at 156,000, while July’s mark was downwardly revised to 189,000 from 209,000 estimated initially. Although the figure underperformed previous months’ prints, it was more than the 75,000 to 100,000 jobs needed for the workforce to keep expanding.
The unemployment rate rose marginally by 0.1 percentage points to 4.4%, missing the forecast of 4.3%, while the participation rate stood flat at 62.9%, pointing that the economy still operates under full employment conditions.
Regarding labour payments, average hourly earnings dropped surprisingly by 0.2 percentage points to 0.1% m/m, while forecasts supported a growth of 0.2%. However, on a yearly basis earnings continued rising by 2.5% for a fifth consecutive month.
Despite labour data weakening, the US manufacturing activity improved surprisingly in the aforementioned month according to the ISM manufacturing PMI readings published few hours later. The index climbed by 2.5 percentage points to 58.8, exceeding the projections of 56.5. The Markit equivalent gauge went up as well from 52.5 to 52.8.
The dollar index sank by 0.75% to an intra-day low of 92.05 in the wake of the labour data, but the evidence on the manufacturing PMI helped the greenback to reverse losses and move up to 92.72.
Dollar/yen hit a low of 109.55 before it rises to 110.74.
The euro gained on US labour data, advancing to $1.1978. However, it fell to $1.1872 following the dollar’s rebound.
Besides that, currency markets were indifferent to less hawkish comments made today by the ECB vice president Vitor Constancio and the ECB governing council’s member Ewald Nowotny, just a few days before the central bank kicks off its next monetary policy meeting on Thursday in Frankfurt. Constancio, during his speech at the Forum Villa d’ Este, said that rising inflation might be a difficult manner than it was earlier thought to be. Additionally, he said that weak global “reflationary pressures” are mainly restricting inflation and employment to reach targets. However, he added that the monetary union is now more resilient to shocks. Nowotny, speaking to reporters today, argued that the markets should not over-interpret the euro’s 13% rise against the dollar this year. Moreover, he said that a careful examination should be conducted before the ECB limits its asset purchases which amount to 2.3 trillion euros.
Meanwhile, data out of the region showed that manufacturing activity in the euro area remained robust in August, with the sector’s PMI increasing by 0.8 points to a six-year high of 57.4, as expected. The figure for Germany, the largest European economy, strengthened from a five-month low of 58.1 to 59.3. Yet, it fell slightly short of expectations which were for the indicator to rise to 59.4.
Cable surged to a two-week high of 1.2994 before it sank to 1.2953. Manufacturing PMI out of the UK gave also some support to the pound earlier in the session, reaching the highest level in three years. The index improved by 1.3 points to 56.9, above the 55.0 expected.
Turning to commodities, oil prices pared losses made in the Asian session as tropical Hurricane Harvey forced major energy refineries to shut down, spreading fears of fuel shortages during the weekend and Labor Day holiday that follows. According to Reuters estimates, the refineries shutdown has impacted about 4.4 billion barrels per day of output. WTI crude futures (October) rose to $47.15 per barrel while Brent climbed to $52.87.
Gold gained some ground in the middle of the European session, rising to $1321.84 per ounce.