The U.S. dollar showed strength last week. Non-farm payroll released on Friday indicated that the labor market had snapped back from a downwardly revised 11k jobs (-6k private sector) to 287k (265k private sector), the strongest employment gain in eight months.
The dollar advanced against most of the major currencies, except the yen and the Australian and New Zealand dollars. The RBA remained neutral, with the RBNZ hinting that until major new policies were implemented to address the housing market, a rate cut could be counterproductive.
The greenback also appreciated against most emerging market currencies except the Argentine peso.
Focus for the week was on the sterling and the yen. Sterling remained under pressure for a second straight week after the June 23rd referendum vote. It reached a low just below $1.28 in the middle of the week before consolidating.
The pound has fallen for three consecutive weeks and in five of the past six weeks as a possible Brexit took center stage. According to analysts, there has been reduced news about the sterling of late and they predict a 15% depreciation of sterling from its pre-referendum high which would bring it to around $1.2750.
Inflation in China Grew
Meanwhile China’s consumer inflation in June grew at its slowest pace since January as increases in food prices lessened and producer prices continued, confirming economists’ views that more government stimulus steps will be needed to support the economy.
The consumer price index (CPI) in China rose 1.9 percent in June from a year earlier, compared with a 2.0 percent increase in May. Analysts had expected a 1.8 percent gain. The last interest cut was on Oct. 23, the seventh time since late 2014, a move taken by the government to counter slowing economic growth.
