Jobs News Fades as U.S. Covid-19 Numbers Continue to Rise

07/06/2020 10:15 am EST

Focus: FOREX

Adam Button

Co-Owner and Managing Director, ForexLive.com

The market bump from the positive June jobs numbers quickly faded as U.S. Covid-19 cases continues to spike, reports Adam Button.

Risk trades initially cheered an unexpectedly strong Unemployment situation report including a much better than expected nonfarm payrolls number, but the enthusiasm didn't last (more below).  

Strong U.S. jobs data and recovering Chinese Purchasing Manager Index data helped affirm the notion of stabilizing growth equals U.S. dollar weakness, which was anticipated in our last report.

Silver (XAG), the Australian dollar (AUD) and the New Zealand dollar (NZD) are leading against the U.S. dollar, while the British pound (GBP) and Swiss franc (CHF) lag (see table below). The U.S. Fourth of July Holiday gave markets a chance to regroup.

Jobs Jump Fades - Performance Jul 3 2020 (Chart 1)

Strong US jobs & caveats

June U.S. nonfarm payrolls roundly beat expectations with 4.8 million new jobs added compared to consensus expectations of 3.2 million. In addition, the prior two reports were revised modestly higher. Perhaps most impressive was the unemployment rate at 11.1% compared to 12.5% expected.

The caveat that market participants had been watching surrounding that metric was in those absent from work for “other reasons.” That metric had swelled recently and would have meant an additional 3 percentage point increase in the May number. The Bureau of Labor Statistics highlighted that many of those probably belonged in the unemployed category were estimated at up to 3%. This month, they estimated that only 1 percent point of them were likely miscategorized.

Perhaps more interesting was how the market responded to the data. Initially it was positive for risk assets but that faded, particularly late on Thursday (the jobs number came out a day early due to Friday being the official Holiday). The tug-of-war between the Coronavirus and reopening continues and it was data from a growing number of problem states that weighed on markets. In particular, 10,109 cases in Florida was a new record an exceed all the daily cases in the EU. The charts below were posted on Ashraf's WhatsApp Broadcast Group right after the release of U.S. jobs report, highlighting intermarket backing of tapering risk appetite.

Jobs Jump Fades - Charts Jul 2 2020 (Chart 2)

Markets were quiet of Friday with the out for a holiday, but the markets are likely to react to the continued increase in Covid-19 cases in the U.S. South and Southwest, particularly Florida and Texas.  

What's Special about the WhatsApp Broadcast Group? The WhatsApp Broadcast Group consists of more frequent trade ideas and updates as well as signaling to members that Ashraf will be issuing a new trade action to the general Premium clients. In each of the winning Premium trades of the past five weeks (gold, silver, EURUSD, DAX), Group members were able to make more gains due to extra guidance via WhatsApp. Sign up through the link above.

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