Market Insight 06-09-2024

• Written by: Ian Morley
• 06/09/2024

Summary:

• EUR/USD Holds Above 1.1100
  The EUR/USD pair remains steady above 1.1100 after posting gains for the past few days. Weakness in the US Dollar continues as the greenback struggles due to soft labour market data, including lower-than-expected US JOLTS job openings and ADP employment figures. The US Dollar Index (DXY) has dropped below 101.00, further weakening USD’s appeal.

• EUR/USD Extends Gains
  EUR/USD is now trading near a weekly high of 1.1120, driven by broader USD weakness. The US Dollar has been weighed down by concerns over a slowing labour market. Meanwhile, the ECB’s rate cut expectations and mixed economic signals from the Eurozone are adding to the market’s uncertainty.

• GBP/USD Strengthens Above 1.3150
  GBP/USD has gained traction, climbing to 1.3180, supported by continued USD weakness. The Bank of England (BoE) is expected to remain cautious with rate cuts, and this sentiment has boosted the Pound. Recent ADP data showing lower-than-expected job growth in the US has reinforced the bearish outlook for the Dollar.

Outlook:

• Focus on US Nonfarm Payrolls (NFP) Data
  All eyes are on today’s US NFP report, which is expected to show a rebound in job growth with 160K jobs added in August. A weaker-than-expected number could solidify market expectations for a 50bps Fed rate cut in September, further weakening the US Dollar. If the NFP figures surprise on the upside, the Dollar could stage a recovery, pushing EUR/USD back toward 1.0900.

• Potential EUR/GBP Movements
  EUR/GBP is facing resistance around 0.8450, and any further upside will depend on the Eurozone GDP figures and broader market sentiment. ECB’s expected rate cuts could cap the Euro’s gains in the short term. However, if Eurozone growth data surprises positively, EUR/GBP could see further strength.

• GBP/USD Eyes BoE and Fed Policy
  GBP/USD remains strong but will depend on how the US labour market report influences Fed expectations. If the Fed’s dovish tone continues, GBP/USD could push higher, while a strong US NFP report might reverse some of the recent Dollar weakness. Market participants are also awaiting the BoE’s next steps, with potential rate cuts in the coming months being priced in.

Global Sentiment:

Global markets remain cautiously optimistic but are on edge as key economic data from the US and Eurozone dominate the narrative. Risk sentiment has been tempered by concerns over a slowdown in the US labour market, which could signal broader global economic weakness. At the same time, China’s continued growth struggles and mixed economic data from Europe add to the uncertain global outlook. Central bank policy divergence remains a key factor, with the Fed expected to ease rates, while the ECB and BoE are likely to proceed cautiously in addressing inflation and growth challenges. Market participants are positioning carefully ahead of the NFP data, which could set the tone for global financial markets in the weeks ahead.