Market Overview 2018-07-09

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On Friday, the most anticipated macro-economic news release were the non-farm employment change and the unemployment rate. The NFP rose by 213k in the previous month, while the consensus estimate was creation of 195k jobs. The jobless rate came with an unexpected result where it rose to 4.0% from 3.8%, thus missed the expectation that it would remain at the same level, while wage inflation grew 2.7% on an annualized basis in June.

It is significant to mention that the wage rise in constantly monitored by the Fed for any evidence of weakening labor market and upward pressure on inflation. Another important release from the US was the trade balance where, where trade deficit declined to a one and a half year low in May due to the rise in exports, thus the trade gap narrowed 6.6%, which is the smallest since October 2016, as reported by Reuters.

In addition, the decline in the trade deficit may suggest that trade could contribute to GDP in the second quarter of the year. The expected for the GDP in the 2nd quarter are 4.0% annualized rate, however the tensions between the US and China, EU, Canada and Mexico are not allowing for a clear outlook for the remaining of 2018.

From Europe came the positive news from Germany, where the industrial output rose to 2.6%, as opposed to the expected 0.3%, suggesting that the Europe’s largest economy is recovering from a weak start of the year. The reading that came on Friday is the highest since November last year and is signaling that the development in the manufacturing sector is still positive. On the other hand, news release from France regarding the trade balance came with disappointing reading, where the trade deficit widened in May and stood at eur 6.01 billion as opposed to revised figure of eur 5.21 billion deficit in April. This is seen as a signal that the French economy has started to slow down just after the initial recovery in May 2017.

Source : Exclusive morning call from FXCC, Monday, 2018-07-09, 07:00 GMT

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