EURUSD increases, as it is resurgent by USD demand.
On the opening day of a new week. The EURUSD pair encounters some supply and declines from a four-day peak. Around the 1.1040 area hit in response to the relatively underwhelming headline US NFP reading on Friday. Spot prices drop below the critical 1.1000 level during the Asian session. And for the time being, a two-day rebound from the 100-day Simple Moving Average (SMA), near the 1.0910 level. Or a nearly one month low, appears to have stopped.
Bets on Fed rate hikes turn out to be a major factor supporting the dollar.
As it becomes more widely believed that the Federal Reserve (Fed) will maintain its hawkish posture. The US Dollar (USD) draws some dip-buying and ends up being a significant component imposing. Some pressure on the EURUSD pair.
The economy added 187K jobs in July, according to the carefully monitored US monthly employment figures. Which together with a downward revision of readings for May and June signaled that demand for workers was weakening. However, steady wage growth and an unexpected decline. In the unemployment rate indicated that the labor market was still quite tight. This gives the dollar some support and leaves. The door open for the Federal Reserve (Fed) to raise interest rates by another 25 basis points in September or November.
The proposed tone is influenced by expectations that the ECB would shortly finish raising interest rates.
The European Central Bank (ECB) is anticipated to end its run of nine straight interest rate increases in September. Amid indications that the underlying inflation in the Euro Zone has peaked. Which, on the other hand, is expected to undercut the trend.
In fact, Fitch Ratings stated on Friday that the peak in ECB rates is now within sight due to declining Euro Zone inflation. Additionally, the ECB observed that the region’s underlying inflation likely peaked during the first half of 2023. In its economic report. Which was released on Friday. This is considered to be yet another element that influences the overall mood surrounding the EURUSD pair. But before this week’s release of US inflation data. Bears might hold off on making big wagers.
US CPI report is expected on Thursday, which will have a significant impact on market expectations on the Fed’s path of future rate hikes and fuel demand for the US dollar. The macroeconomic statistics for the Euro Zone, including the German Industrial Production and Sentix Investor Confidence, will provide traders with guidance on Monday.
The USD is dependent on the speeches of a number of FOMC members because there isn’t any pertinent economic data from the US due for release at the moment. Any policy related comments could provide the dollar some momentum and let traders seize short term opportunities near the EUIRUSD pair. But given the aforementioned underlying landscape, it appears that spot price declines are the course of least resistance.
