EUR/USD soared on US economic data

The euro extended its gains against the US dollar on Friday, following the disappointing non-farm payrolls report from the United States, which proved controversial compared to the unemployment data, released at the same time.

EUR/USD touched the highest point for todays session at 1.3283 at 12:41 GMT, after which consolidation followed at 1.3277, rising by 0.54%. Support was expected at July 25th low, 1.3166, while resistance was to be met at August 1st high, 1.3311.

Minutes ago the Bureau of Labor Statistics said that US employers added a lesser number of jobs than projected in the month of July, which suggested a steady, but still not strong enough economic growth during the summer period. Non-Farm Payrolls indicator increased by 162 000 in July, while preliminary estimates pointed an increase by 184 000 jobs. Junes result was revised down to 188 000 from 195 000 previously.

A separate report showed that unemployment rate in the United States decreased by 0.2% to 7.4% in July, reaching its lowest level since December 2008, while expectations pointed a slighter decrease to 7.5%. These labour market data implied that economic growth in the country definitely influenced employers decisions. Higher taxes, federal expenditure cuts and weaker growth in countries abroad caused a negative impact on US economy during the past months, despite the fact that the rate of hiring remained steady during this year. Another negative impulse was submitted by the revision down of the total number of employed people during the past two months, as it was decreased by 26 000.

Additionally, personal spending in the United States rose at a greater rate than personal income during the month of June. Consumers expenses rose by 0.5% in June in consonance with projections, while at the same time consumers income increased by 0.3%, below the expected 0.5% increase. The rate of savings in the states diminished to 4.4% in June from 4.6% in May. If not taking into account the rate of inflation, the real income of consumers decreased by 0.1% in June, after the 0.2% rise a month ago. On the other hand, real consumer expenses rose by 0.1% during June. Core personal consumption expenditures (PCE) price index increased by 0.2% in June on a monthly basis, after the 0.1% climb in May, while the annual value of the index rose by 1.2% in June, marking the third consecutive monthly climb. Personal consumption expenditure (PCE) deflator advanced 1.3% in June 2013 compared to June 2012, after the 1.1% increase in May.

A report by the Federal Open Market Committee (FOMC) on July 31st left the monthly pace of bond purchases intact, while additionally it was said, that “the committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term.” As inflation rate seemed suppressed, as the above data points showed, the Federal Reserve Bank may consider to keep the scale of its asset purchases at current 85 billion USD per month in the future in order to further spur growth.

Meanwhile, earlier on Friday an official report said that the number of unemployed people in Spain dropped for the fifth month in a row in July, by 64 900, after the 127 200 drop, recorded during the previous month. Preliminary estimates pointed a larger decline in the number of unemployed, by 80 000.

Upon releasing the reports out of the US, the dollar index, which tracks the performance of the greenback against a basket of six other major currencies, erased 0.7% to reach 81.955. The euro was trading lower against the British pound, as EUR/GBP cross dropped by 0.37% to 0.8705. EUR/JPY, in the mean time, added 0.18% to trade at 131.72.