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US Labor Data Still Weak

The release of United States job reports on Friday showed a weakening economy and low hiring rates. This change in the job market encouraged risk aversion in the marketplace and was fuelled by the ongoing European debt crises. During trading on Friday, the euro fell to two-year lows against the greenback.

European Central Bank Cuts Rates

On Thursday, the European Central Bank decided to cut interest rates to a record low of 0.75. After a continued economic downturn in former economic powerhouses like Germany, the ECG decided to take action to reign in the economy. This decision is expected to drive investors to other stocks, money funds and currencies that can earn a higher rate. The Bank of England and the central bank in China also chose to adopt more fiscal easing policies.

The United States dollar is already at record lows. Since Europe, England and China are lowering their main rates, it decreases any advantages of holding these currencies in place of the greenback. Analysts believe that the United States dollar will remain at the current interest rate. Even with weak jobs data, the economy is not bad enough yet for the Federal Reserve Bank to enact new measures.

Euro Drops Versus the Greenback

During Friday’s trading, the euro dropped against the greenback 1 percent to a two year low of $1.2264. By the end of the day’s trading, the euro rose to $1.2296. Over the course of the week, the euro fell 3 percent against the dollar.

Meanwhile, the United States dollar dropped 0.33 percent to 79.61 yen. Surprisingly, the greenback gained against the Swiss franc to reach a one and a half year high. The changing fortunes of the United States dollar are attributed to the nonfarm payrolls report released by the United States Labor Department on Friday. Jobs rose by 80,000 in the month of June. Although this number is still short of forecasts, it is higher than the 77,000 jobs gained in May. At the end of June, the United States was still sitting at an 8.2 percent unemployment rate.

Weak Euro

Currently, the European Central Bank has set the deposit rate to zero. The main interest rate is at 0.75 percent. This will make it difficult for the currency to rise in the future because investors will only use the currency to finance investments. The ECB has enacted this policy as one of the cheapest ways to deal with the debt crisis. As a result of the recent decision, the euro remained near record lows against the New Zealand and Australian dollars. The euro is also trading at 1.2006 versus the Swiss franc while the greenback is trading at 0.9763.

US Jobs Impact Canada

The Canadian loonie is trading at C$1.0186 marking a decline of 0.2 for the week against the United States dollar. As bond prices rise in Canada, the currency is taking a severe hit from jobs data in the United States. The jobs reports coming out of the United States fueled a drop in stock markets and commodity prices around the world. As news of this came out, the commodity-rich country saw a fall in the value of the loonie.

In the month of June, the Canadian job market slowed for the second month in a row. Higher than expected gains in employment earlier this year are now being equalized as business owners become more realistic about the economy’s expectations.

On Thursday, the loonie had finished at C$1.0144 against the greenback. By Friday, the loonie had fallen still lower to a rate of C$1.0186. Canadian two-year government bonds are currently trading at 0.988 percent. Ten-year bonds are yielding 1.693.

Oil and Copper Fall

Market prices for oil, copper and gold dropped during trading on Friday. Meanwhile, the price for United States and German bonds rose. Investors are still trying to seek out safe havens amidst the tumultuous marketplace. With two straight months of weak labor reports, investors are expecting the Federal Reserve Bank to make a move. In previous statements, Ben Bernanke had affirmed his commitment to taking action if necessary. The continued downturn in the United States indicates that the time for quantitative easing by the Federal Reserve may be soon. 

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