Title: EUR/USD Weekly Forecast: Markets Brace for Turbulence Ahead of US Economic Data Deluge
Original Article by Yohay Elam | Adapted and Expanded Version
The euro-dollar (EUR/USD) currency pair is poised for a volatile week as the market prepares for a flood of economic releases from the United States. While the currency pair showed hesitant movement during the previous trading week, signs suggest that fundamental events scheduled over the upcoming sessions may force significant price action. Traders are advised to monitor US macroeconomic figures closely, especially those with implications for future Federal Reserve policy, as they are likely to dictate the direction for EUR/USD in the near term.
Market Preview and Recent Performance
– EUR/USD traded within a tight range throughout much of last week.
– The pair remained mostly above the 1.0700 support area but was unable to reclaim the psychological handle of 1.0800 in a sustained manner.
– Lack of U.S. economic data and a relatively subdued European docket contributed to the reduced volatility.
– Nevertheless, dovish rhetoric from several Federal Reserve policymakers helped put a cap on U.S. dollar strength.
Several factors now bring a sense of urgency to the upcoming trading week, with high-impact data releases from the U.S. expected to stir the market. The Federal Reserve is looking for more signs of inflation cooling and labor market loosening before considering any policy rate changes, meaning any surprises in the data could heavily influence market sentiment and expectations.
Upcoming Data Releases and Market Impact
The coming week is packed with critical economic reports from the United States that are likely to have a direct effect on EUR/USD dynamics.
Key events to watch:
– ISM Manufacturing PMI (Monday): Indicates the overall economic health in the U.S. goods-producing sector.
– JOLTS Job Openings (Tuesday): A key measure for labor market conditions, often watched by the Fed for signs of demand cooling.
– ISM Services PMI (Wednesday): Reflects the strength of the larger U.S. services sector.
– ADP Nonfarm Employment Change (Wednesday): A precursor to the official payrolls report.
– Weekly Jobless Claims (Thursday): Offers real-time insight into layoffs and hiring trends.
– Nonfarm Payrolls (Friday): The most influential employment data release, with the potential to move markets significantly.
– Average Hourly Earnings: Tied directly to wage inflation, which is a core concern for monetary policymakers.
– Unemployment Rate (Friday): Lifts the visibility of the labor market’s robustness or weakness.
If these figures come in stronger than expected, the Federal Reserve may push back against calls for rate cuts, which could support the U.S. dollar and weigh on EUR/USD. Conversely, weaker data could accelerate the perception that the Fed may begin cutting rates sooner, potentially boosting the euro.
Federal Reserve’s Position and Policy Outlook
Despite market expectations for interest rate cuts later in 2024, the Federal Reserve has consistently asked for more signs that inflation is sustainably heading toward its 2 percent target. Over the past weeks, Fed speakers have maintained a cautious tone, refusing to commit to any significant easing until there’s more compelling evidence from inflation and labor market data.
Key comments from Fed officials:
– Several members have suggested rates need to remain higher for longer.
– Others have opened the door for potential adjustments later in the year, contingent on further weakness in inflation and employment numbers.
This conservative stance has kept expectations in check, but recent softer inflation readings have reignited discussions of rate cuts in the September FOMC meeting.
Eurozone Dynamics
On the European side, the economic landscape remains mixed:
– Preliminary inflation data from the Eurozone last week showed slow progress in the path toward the European Central Bank’s (ECB) 2 percent target.
– Core inflation remains sticky in some regional economies.
– The ECB recently hinted it may begin easing monetary policy in the months ahead, depending on how data evolve.
Nonetheless, the ECB’s willingness to consider interest rate cuts, especially in comparison
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