The greenback strengthened against the majors following the highly anticipated June jobs report, pushing the euro toward the 1.40-figure and the sterling to 1.6330. The US equity bourses fell sharply, with the Dow Jones, S&P 500 and Nasdaq all lower by over 2% in morning trading.
The June labor report was mixed with non-farm payrolls surging sharply higher than expected and closely tracking yesterday's ADP private sector payrolls. The data revealed a loss of 467k jobs compared with estimates for a slight worsening to -363k from May at -345k. However, the unemployment rate climbed higher in June, albeit by less than consensus expectations for an increase to 9.6%, instead edging up to 9.5% from 9.4% a month earlier. Average earnings for the month were flat compared with an upwardly revised 0.2% reading in May, while the average workweek slipped marginally to 33.0 hours from 33.10 hours previously.
Also released today saw May durable goods orders unchanged from April at 1.8% and factory orders improve by more than estimates at 1.2% in May versus a downwardly revised April reading at 0.5%.
Euro Slides on Risk Aversion
The euro fell toward the 1.40-level as traders moved away from riskier assets, sending equities sharply lower. The European Central Bank announced the results from its policy meeting earlier in the session, leaving interest rates unchanged at record lows at 1.0%. In the subsequent press conference from Bank President Trichet, he said that current interest rate levels were appropriate and that he expects the Eurozone economy to rebound by mid-2010. Trichet said the risks to outlook are balanced, adding that the drop in June inflation was expected, reflecting temporary effects.
EURUSD trades just above the 1.40-level, with a break lower targeting initial support at 1.3960 followed by 1.3930 and 1.39. Subsequent floors will emerge at 1.3870, backed by 1.3840 and 1.38. On the topside, resistance starts at 1.4050, followed by 1.4080 and 1.41. Additional ceilings are seen at 1.4130, followed by 1.4160 and 1.42.