US private employment in July added 44,000 jobs according to ADP's National Employment Report, falling significantly short of the 70,000 market expectation, while the euro-dollar exchange rate reached its highest level since mid-June. The weaker-than-expected employment growth reflects companies reducing hiring due to surging energy prices and additional cost pressures from artificial intelligence, according to Pantheon Macroeconomics Chief Economist Samuel Tombs. The currency movements occurred against a backdrop of uncertainty over the durability of Japan's large-scale intervention conducted with US assistance to support the yen.
US July Private Employment Grows 44,000, Lowest Since January
The ADP National Employment Report showed US private sector employment increased by 44,000 in July compared to the previous month. This marked the lowest growth since January, which recorded an increase of 11,000 jobs. The July figure represented the second consecutive month of declining employment growth. June's employment increase was revised downward from 98,000 to 95,000.
Samuel Tombs, Chief Economist at Pantheon Macroeconomics, stated that companies are reducing hiring due to surging energy prices and additional cost pressures from artificial intelligence. Tombs noted that AI is improving the productivity of existing employees, making it more difficult to predict medium- to long-term labor demand.
Euro-Dollar Hits 1.15615, Iran and Oman Agree on Hormuz Strait Channel
The dollar index (DXY) fell 0.175 points (0.175%) to 99.706. The euro-dollar exchange rate rose to 1.15508 dollars, up 0.00201 dollars (0.174%) from the previous session's 1.15307 dollars. The currency pair reached 1.15615 dollars at one point, marking its highest level since mid-June. The euro gained on expectations of the Hormuz Strait reopening, benefiting the currency due to Europe's high energy dependence.
Iran announced it reached an agreement with Oman to establish a joint channel in the Hormuz Strait. According to Iran's IRNA news agency, Iranian Foreign Ministry spokesperson Esmail Baghaei stated that both sides agreed on the geographical coordinates of the route under consideration. Baghaei said a joint statement between the two countries containing major considerations and agreements is currently under review and finalization.
The dollar-yen exchange rate stood at 157.723 yen, down 0.045 yen (0.029%) from the previous New York session close of 157.768 yen. The dollar-yen pair fell to around 157.3 yen in early morning trading while digesting US employment data before narrowing losses. West Texas Intermediate (WTI) crude oil fell more than 2% at one point during the afternoon session.
Analysts Question Durability of Japan's Currency Intervention
Jeremy Stretch, Head of G-10 FX Strategy at CIBC Capital Markets, stated that in many cases the expression "putting on a band-aid" feels relatively appropriate. Stretch indicated that realistically, if any one of three criteria is not met, this amounts to merely a deterrent measure. He presented three criteria: more aggressive interest rate hikes by the Bank of Japan (BOJ), reduced pricing for US Federal Reserve rate hikes, and declining oil prices.
Joel Kruger, Market Strategist at LMAX Group, assessed that while the risk of additional intervention remains high, the threshold for another measure will probably be higher unless disorderly yen weakness emerges anew. Kruger mentioned that intervention can help slow the pace of depreciation, but history shows it rarely changes long-term trends unless underlying fundamentals shift.
The dollar-Swiss franc exchange rate fell 0.0022 francs (0.272%) to 0.8072 francs. The offshore dollar-yuan exchange rate remained unchanged at 6.7482 yuan.
FAQ
What was the US July private employment growth according to ADP?
US private employment in July increased by 44,000 jobs according to the ADP National Employment Report, falling short of the 70,000 market expectation and marking the lowest growth since January's 11,000 increase.
Why did the euro-dollar exchange rate reach its highest level since mid-June?
The euro-dollar reached 1.15615 dollars at one point due to expectations of the Hormuz Strait reopening following Iran and Oman's agreement to establish a joint channel, which benefits the euro given Europe's high energy dependence.
What criteria did analysts cite for effective Japan currency intervention?
Jeremy Stretch of CIBC Capital Markets presented three criteria: more aggressive interest rate hikes by the Bank of Japan, reduced pricing for US Federal Reserve rate hikes, and declining oil prices, noting that failure to meet any one criterion makes intervention merely a deterrent measure.
