In the wake of the US non-farm payroll figures, David Lamb, head of dealing at FEXCO Corporate Payments, comments:
Dollar bulls could be forgiven for asking if they will ever get a break. Despite the US economy posting a near-straight A jobs report for June, the Dollar has again been undone by one decisive flunk – the fall in wage growth. Americans’ wages grew by a paltry 0.2 percent in June and the May figure was revised down too.
The US economy may be creating jobs at a prodigious rate but those in work are seeing their paypackets get squeezed – and this is a big warning sign for the economy. The uptick in the unemployment rate may have raised eyebrows but this can be dismissed as a side effect of the growth of America’s labour force. So while this is a solid report in many ways, the continued weakness in wage growth undermines all the positives for Dollarwatchers.
Despite the Fed’s consistently hawkish tone, on this evidence Janet Yellen has plenty of grounds to hold off on the next rate hike. As a result the Dollar took an immediate hit against both the Euro and the Pound, and despite a modest rally is showing no sign yet of breaking out of its weak run.