RATE OF UNEMPLOYMENT FALLS BUT PRIVATE PAYROLLS SIGNIFICANTLY LOWER THAN EXPECTED

Date: July 2, 2010

A larger than expected decline in non-farm payrolls was announced this afternoon, falling by 125,000 rather than the expected 110,000. The rate of unemployment in the United States has fallen to 9.5%, from 9.8%. The key figure of private payrolls came in significantly lower than expected, however, rising 83,000 as opposed to the forecasted rise of 110,000.

Markets reacted violently as they digested the latest employment figures from the U.S. The euro gained against the dollar ($1.2592), up from the $1.2550 it had traded at before the report and the dollar was at 87.35 yen compared with 87.60 yen before the report.

Mark Bolsom, Head of the UK Trading Desk at Travelex Global Business Payments comments, “We were expecting further job losses but what was disappointing was the private sector pick up. It is concerning that the U.S.’ strong GDP number is not filtering down into the jobs market. This could ultimately undermine consumption, confidence and the recovery itself.

“With a $787 billion stimulus package pumped into the US economy, investors will have been expecting to see a more robust employment picture by now. Unfortunately the US economy is stuck in a vacuum – dismal manufacturing and housing data have confirmed that growth is slowing.”

Bolsom continues, “It is highly unlikely that the Federal Reserve will even think about raising rates with unemployment so near to 10%. We have a high long-term rate of unemployment in the U.S and I don’t expect to see employment stabilise for another few years yet.”

Bolsom expects investors to close out on long dollar positions before the long weekend in the U.S, thereby continuing the dollar’s downward trend.

- Ends -

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