Given unexpectedly good ADP payroll report,
it was a certainty that analysts would upwardly revise their earlier
predictions for the official release of Labor Department data today. The
most recent consensus called for an additional 120,000 new jobs
created, but the topside range went as high as 200,000. In actuality, the
U.S. Labor Department reported that only 18,000 new jobs were added in
June, far fewer than predictions and well below the downwardly revised
25,000 number in May. Additionally, the U.S. unemployment rate was
reported higher at 9.2%, even as a majority of analysts had predicted
that the unemployment rate, would, in fact, decline to 9.0%
That news should come as quite a disappointment to Ben Bernanke and
the Federal Reserve members, as well as to investors who questioned the
possibility of another round of quantitative easing. Even in spite of
the Fed’s stance to the contrary, it appeared that the stalled economy
might warrant a QE3. The recent signs of recovery, coupled however with
an uncertain labor picture, would suggest that the Fed may still have to
keep QE3 in its monetary basket of tricks.
The diminished likelihood of QE3 is important to the recovery, and the U.S. Dollar’s continued weakness. A stronger U.S. Dollar
would result in higher savings rates and lower inflation. Likewise,
given that it is so closely linked with their employment mandate, it
improves the Fed’s monetary outlook for economic growth; this, even in
spite of looming budget cuts aimed at reducing the deficit, a
prerequisite for the U.S. to maintain its stellar credit rating.
Ahead of the report’s release, the U.S. Dollar was rallying against the majors. The EUR/USD pair was trading at 1.4313, and eToro trading floor sentiment was bullish with 23 buyers to 9 sellers.
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