Pound Dives Against Dollar As UK PM Theresa May Clings Onto Power

The euro US dollar exchange rate is trading close to the flat line on Friday. The pair remained subdued in early trade as investors awaited the US non-farm payroll. Following a brief spike in the value of the dollar, the pair is once again trading close to the flat line at US$1.1150.

There was no high impacting eurozone data for investors to digest. The euro traded flat as investors focus on US economic data.

Today Christine Lagarde started as the President of the European Central Bank. The former French finance minister and Managing Director of the International Monetary Fund takes over from Mario Draghi amid weak and falling inflation.

Yesterday the eurozone consumer price index showed inflation grew at just 0.7% year on year in October. This was the lowest since 2016. GDP for the eurozone was slightly better than expected at 0.2% growth quarter on quarter. Christine Lagarde’s task is large. She needs to lift inflation and boost growth with a divided ECB and European governments who are reluctant to increase fiscal spending.

Mixed Jobs Report

The US dollar briefly spiked higher following the release of the US Labour department’s non-farm payroll. The report showed that 128,000 jobs were created in the US in October. Analysts had predicted that just 85,000 jobs would have been created. In addition to the better than forecast headline number, upward revisions were made to August and September’s figures to the tune of 95,000 more jobs. Whilst job creation is clearly slowing compared to last year, it remains strong. The figures support the Federal Reserve’s decision to put interest rate cuts on pause.

The reason the US dollar quickly pared gains was because average earnings were disappointing at just 0.2% month on month. This was below the 0.3% forecast. The lacklustre earnings growth suggests that it could be a while before inflation picks up. This means that whilst the Fed won’t be cutting rates soon, they won’t be hiking interest rates either.

Investors will now look ahead to the US ISM manufacturing report. Analysts predict that the manufacturing sector will rebound from September’s 47.8 but remain in contraction territory at 49.


What do these figures mean?
When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.

For example, it could be written:

1 EUR = 1.12829 USD

Here, €1 is equivalent to approximately $1.13. This specifically measures the euro’s worth against the dollar. If the U.S. dollar amount increases in this pairing, it’s positive for the euro.

Or, if you were looking at it the other way around:

1 USD = 0.88789 EUR

In this example, $1 is equivalent to approximately €0.89. This measures the U.S. dollar’s worth versus the euro. If the euro number gets larger, it’s good news for the dollar.


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