Trading conditions will be subdued on Friday with US markets closed for a holiday. There will be the risk of erratic trading, although the more likely outcome is that narrow ranges will prevail. Risk appetite is liable to be slightly weaker following the US payroll report and this could trigger some further defensive dollar demand, especially if global equity markets continue to weaken. The US currency will find it difficult to strengthen through the 1.39 region against the Euro with underlying dollar sentiment still subdued.

The headline US employment data was weaker than expected with a payroll decline of 467,000 for June following a revised 322,000 the previous month. The unemployment rate increase was slightly lower than expected with an increase to a 26-year high of 9.5% from 9.4%. The secondary elements in the data continued to give significant cause for concern with a decline in weekly hours while the unemployment increase was held back by a decline in the workforce which will maintain fears over the consumer spending outlook. Jobless claims also remained above the 600,000 level in the latest week at 614,000.

Risk appetite was generally weaker following the US employment report and this helped push the Euro weaker against the US currency, The Euro dipped sharply to lows near 1.3925 in early Asia on Friday, but recovered back to near 1.40 later in the day. Choppy trading may be a significant risk later in the day with the US markets closed.