Friday saw the US dollar take on a heavy batch of water after a dismal Nonfarm Payroll release added to a significantly lower ADP release earlier on in the week. The two data points, amalgamated together, didn’t leave much positivity for the dollar as it showed the US labour market may be showing signs of unravelling. The ADP release signalled that the US labour market added 27,000 jobs in May but struggled to have the market moving impact it once did. The favoured measure, Nonfarm Payrolls, hammered home the point with only 75,000 jobs added for the month, around half of what analysts were expecting. More importantly, however, average hourly earnings growth began to slow too, suggesting the slowing of the US labour market may not be due to the US economy reaching the end of its growth cycle. Instead, the release was synonymous with recent data suggesting a slowing of the US economy as tariffs and fiscal stimulus begin to take their toll. This was also apparent in the Fed’s narrative last week which increased the likelihood of an “insurance” rate cut as the US economy begins to slow. This week, Fed speakers will remain muted with the monetary policy meeting scheduled for next week Wednesday. Additionally, over the weekend Donald Trump reduced the threat of Mexican tariffs implemented today after an immigration deal was passed last Friday. This now gives the US 90 days to review Mexico’s immigration policies while the USMCA deal remains unratified.


Sterling rallied off the back of last week’s poor labour market data release from the US but has lost most of the ground gained this morning. The UK witnessed political scandals over the weekend, that eroded Michael Gove’s chances of becoming the next Tory leader. Today, the Conservative backbench 1922 committee will close the nomination window at 1700 BST, where any candidate with less than 8 MPs support removed from the race. Elsewhere in central London today a slate of nominees begin their campaigns, with Jeremy Hunt, Michael Gove, Dominic Raab and Matt Hancock all set to begin the process before the 1922 deadline despite all 4 being safe from this deadline already. After the field is formally announced at around 17:30 BST today, the remaining candidates will partake in a series of votes beginning Thursday until the final 2 nominees remain. On Thursday, any nominee with 16 votes or fewer will be removed from the contest, or if all candidates receive more than 16 votes the member with the least support is removed. Results are expected around 13:00 BST on Thursday. Data wise the calendar is full again for the pound, however, the currency remains reluctant to trade on stable economic data due to significant political uncertainty remaining. At 09:30 BST today April’s GDP data is released, with May’s labour market report released on Tuesday at the same time.


The euro reached a 10-week high on Friday following the US labour market report, However, the single currency has started the week on the back foot, depreciating a third of a percentage point at the time of writing, as tensions in Italy reignite. Adding to the euro’s woes is a Reuters “sources” story which outlines worries from some monetary policy setters inside the ECB over a strengthening euro and deteriorating investor confidence in the central bank’s inflation outlook. The likelihood of further cutting by the ECB increased last week following dovish Fed rhetoric. The possibility of lower Eurozone rates along with the concerns over a stronger euro may cap the single currency over the coming periods. Although tensions in Italy haven’t played a significant part in the euro’s price action of late, the potential resignation of Italian Prime Minister Conte, should the coalition not reach a compromise with the European Commission over fiscal spending, has added further downside pressure to the currency. Conte also stated that any disciplinary action by the Commission on the Mediterranean economy could spark market volatility and prompt a potential credit downgrade of Italian assets. Today, the Prime Minister will meet with the leaders of both the Five Star and the League parties to discuss how the year-long coalition will move forward.


The loonie was one of the main beneficiaries following Friday afternoon’s data releases, rallying 0.75% over the course of the session. Weak labour market data coming from the US coupled with wage growth surprising to the upside at 2.6% in Canada, gave the loonie the same positivity Governor Poloz had in the latest monetary policy meeting. The Canadian economy has shown signs of rebounding from its slumber in Q1 and has proven positive for the Canadian dollar despite oil prices continuing to fall back to the $50 mark as global growth teeters again.