Weekly Market Review - July 1-5
The US dollar has recovered some of the recent losses this week as the Nonfarm payrolls indicator showed that the labor market was in good shape. Besides, US President Donald Trump and Chinese President Xi Jinping hinted that they might restart the talks around tariffs. EUR/USD fell 1.42% while GBP/USD fell 1.67% on the week.
Gold and silver declined by over 1.3% on the week as the markets hope the Sino-US tensions to ease.
In the cryptocurrency market, Bitcoin entered a correction, losing over 4.5% over the week, and currently trading above $11,000 per coin.
Nonfarm Payrolls Surprise Economists
The US labor market created way more jobs than expected last month, questioning the need for an urgent interest rate cut by the Fed. On Friday, government data showed that Nonfarm payrolls index rose by 224,000 in June, while analysts expected to grow by 160,000. However, the unemployment rate surprisingly increased to 3.7%, while economists expected the indicator to remain at 3.6%, which is the lowest level since 1969. Despite the favourable Nonfarm payroll indicator, the market still expects the Fed to cut rates later this months.
UK House Prices Move up
UK house price index increased at the fastest annual rate in more than two years in the second quarter of this year. On Friday, mortgage lender Halifax said that, year on year, house prices jumped 5.7% in the three months to June, after increasing by 5.2% in the three months to May. Nevertheless, the growth fell short the analysts’ expectations, who predicted a reading at 5.9%. Halifax warned that the annual growth was distorted by the weak price increase in the corresponding period of last year.
Eurozone’s Retail Sales Unexpectedly Decline
Eurozone’s retail sales index for May declined despite analysts’ expectation of slight growth. On Monday, Eurostat said that retail sales in the 19 countries fell 0.3% in May compared to the previous month, defying economists’ expectations of a 0.3% increase. Year-on-year, the indicator rose by 1.3%, also below the anticipated growth of 1.6%. This is the second month of negative performance in retail sales, with residents spending 0.5% less on food, drinks and tobacco. On the other side, online shopping rose 2.3%.
US Trade Gap Jumps on Increasing Imports
The US trade deficit rose to the highest level in five months in May driven by imports of goods. Economists believe that imports rose as companies restocked before a potential increase in tariffs on Chinese goods. On Wednesday, the Commerce Department said that the trade gap jumped 8.4% to $55.5 billion in May, after $51.2 billion recorded in April, which was revised up from previously reported $50.8 billion. Analysts expected the trade deficit to expand to $54.0 billion in May. Last week, President Donald Trump and Chinese counterpart Xi Jinping agreed to restart talks.
US Jobless Claims Fell More Than Anticipated
The number of US residents filing applications for unemployment benefits declined last week more than expected, suggesting a stable labor market. On Wednesday, the Labor Department said that initial jobless claims for the week ended June 29 fell 8,000 to a seasonally adjusted 221,000. Data for the previous week was revised up by 2,000 more applications. Analysts surveyed by Reuters anticipated a decline to 223,000 last week. The four-week moving average, which is a more accurate indicator, rose 500 to 222,250.
US Factory Activity Growth Slows Down
The American manufacturing sector grew last month at a slower rate compared to May. On Monday, the Institute for Supply Management (ISM) said that the index of national factory activity declined in June to 51.7 from 52.1 in May, which is the slowest pace since October 2016. Nevertheless, the figure was slightly above economists’ expectations of 51.0. A reading above 50 points to an expansion in the sector. Employment index increased to 54.5 from 53.7 in May, against the expected reading at 52.8.
Upcoming News to Watch
Next week, the US dollar and the stock markets might be shaken as the Fed’s Federal Open Market Committee (FOMC) will present its meeting minutes on Wednesday and the Monetary Policy Report on Friday.
On Wednesday, the UK will release several important economic indicators, such as the GDP performance in monthly terms, industrial production, manufacturing production, construction output, and the trade balance for May.
On the same day, the Bank of Canada will meet to decide the interest rate change and to present the monetary policy.
Anatol has been writing for our news site for a year and is the newest member of our team. While he’s new to us, he’s certainly not new to trading with over 10 years’ experience being a professional financial journalist and working in the markets. Learn more.