26/07/2024
Written by: Ian Morley
Summary:
Yesterday, the USD experienced another downward movement after comments from Fed Powell hinted at a potential rate cut. This led to declines in 2-year and 5-year treasury yields, while GBPUSD and EURUSD rose to previous resistance levels. Initially, the EUR declined following lower growth and inflation forecasts from the ECB, with markets anticipating significant rate cuts. However, EUR weakness was short-lived as the currency recovered by the end of the day.
Speeches:
Market Insight:
Following a week of USD decline due to dovish remarks from Fed Powell and concerning job market data, all attention today is on the nonfarm payroll print and hourly earnings. Both GBPUSD and EURUSD have seen upward momentum. Today’s numbers could either solidify USD weakness or trigger a sharp reversal. Market consensus suggests that much of the negative data has already been factored in, so any further USD weakness could be brief. Regardless, USD buyers should capitalise on the recent currency weakness.
Earlier in the day, final GDP readings from Europe are expected to remain unchanged at 0% growth in Q4.
Analysis:
This week has been favourable for USD bears, with weakening indicators in the US economy and job market, coupled with dovish statements from Fed Powell. Today’s job figures are anticipated to be softer than January, indicating a cooling job market. Given the string of weak data this week, along with the expected softness in today’s numbers, it begs the question: is the market already pricing in the dovish outlook on rates? USD buyers will be closely monitoring the release at 1:30 PM.