09/09/2024
Written by: Ian Morley
Summary:
In recent trading sessions, major currency pairs such as EUR/USD and GBP/USD have experienced fluctuations amid a softening US Dollar and broader risk-averse sentiment in the market. The EUR/USD has hovered around 1.1050, buoyed by weaker US PMI data, which signalled a fifth consecutive month of contraction in the manufacturing sector. This weakness in the US economy has tempered the US Dollar, providing some support to the Euro, although the pair struggles to maintain a firm upward momentum due to ongoing concerns about the global economic outlook and the upcoming US jobs data.
Similarly, GBP/USD is facing pressure around 1.3100, unable to fully capitalise on the Dollar’s softness due to the cautious market sentiment. Both pairs are highly sensitive to upcoming economic data releases, particularly the US JOLTS Job Openings report and Nonfarm Payrolls (NFP) data, which are expected to provide further insight into the US labour market and influence the Federal Reserve’s future interest rate decisions.
Outlook:
Looking ahead, market participants are focused on a series of key economic data releases that could significantly impact the direction of major currencies. The US JOLTS Job Openings data, expected to show a slight decrease in job vacancies, and the Nonfarm Payrolls report, which will be released on Friday, are crucial in shaping expectations around the Federal Reserve’s monetary policy. Investors are currently divided on whether the Fed will begin cutting interest rates in September, with the labour market data likely to be a decisive factor.
In the Eurozone, attention will be on the Producer Price Index (PPI) data and Retail Sales figures. A sharp deflation in producer prices and weak retail sales could strengthen expectations of an aggressive policy-easing cycle by the European Central Bank (ECB), further influencing the EUR/USD pair.
Additionally, the Bank of Canada (BoC) is expected to announce a 25 basis points rate cut, which will also be closely watched as it may set the tone for other central banks’ decisions in the coming months. Overall, the markets are on edge, with significant volatility expected as these data points are released.