The US dollar gained against a basket of currencies after news released that the U.S. economy lost 247,000 jobs in July, fewer than expected jobs, while the job loss in June was revised lower to 443,000. The unemployment rate dropped to 9.4 percent in July from 9.5 percent in June, the first drop since April 2008. Recent data has shown that the US economy is starting to recover, such as fewer unemployment claims, positive corporate earnings data, manufacturing, housing, and retail sales. Investors are hoping that consumers will start spending again to help pull the U.S. economy out of the recession.
The euro tanked as investors reacted positively to upbeat U.S. economic data with talk that the U.S. economy will outperform other developed countries. The European Central Bank left its interest rate at 1 percent yesterday and said it sees a gradual recovery in 2010. The ECB also mentioned that interest rates are ‘appropriate” and will remain steady for the near-term.
The British pound fell on the back of the stronger U.S. jobs report. The sterling started to weaken yesterday after the Bank of England left rates at a record low 0.5 percent and unexpectedly increased its asset-purchase plan, indicating that financial conditions remain weak.
The Japanese yen weakened as talk of a global recovery dampened demand for safe haven currencies. Positive U.S. jobs numbers encouraged Japanese investors to buy higher-yielding assets overseas. The Ministry of Finance recently revealed that Japanese investors bought more overseas stocks than they sold.
The Canadian dollar fell as Canada 's economy lost more jobs in July. Employment dropped by a net 44,500 jobs last month after a net loss of 7,400 jobs in June. The unemployment rate remained at 8.5 percent. Meanwhile, crude oil fell as the U.S. dollar appreciated. Oil prices are still close to $72 a barrel.
The Australian dollar softened slightly after the central bank said interest rates are “appropriate”, while signaling the next move would likely be a rate hike. Surprising news that 32,200 new jobs were created in July, while the jobless rate held at 5.8 percent kept the Australian dollar strong.
The New Zealand dollar held gains on hopes that a global recovery will boost demand for higher-yielding assets. The currency was supported by news that the country is more optimistic about the outlook for its housing market. Investors, however, remain cautious as its country's jobless rate recently increased to 6 percent last quarter from 5 percent in the previous three months.
The Mexican Peso benefited from improvement in the U.S. labor market with hope that as the U.S. economy recovers, it would boost their exports. The U.S. is Mexico 's biggest trading partner and buys 80 percent of Mexico 's exports.
10-Year Treasury Note Yield: 3.8723%
Dow Jones Industrial Average: 9,410.58 +154.47