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Euro and British Pound Gain Traction as Investors Anticipate Us Employment Report

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Euro and British Pound Gain Traction as Investors Anticipate Us Employment Report

Investors are favoring the euro and British pound today, Friday, as they await the US employment report that may indicate steady hiring ahead of a potential downturn. The report, however, might not offer clear guidance on future Federal Reserve policy due to overlooked household financial conditions and strikes. Economists predict an increase of 173,000 jobs in September, but forthcoming data could suggest a significant drop, providing mixed signals and boosting demand for risk assets.

Changes in the labor market and average earnings could heavily impact the Federal Reserve’s future rate plans amidst escalating borrowing costs and a shrinking labor market. This could potentially prompt policymakers to abandon their hawkish stance as they approach the end of the tightening cycle. The technical picture indicates demand for the euro, with major players’ support being crucial for maintaining control at specific levels. The position remains uncertain until control over 1.2190 is regained, with a potential for recovery towards 1.2220 and a possible touch at 1.2060.

In other market news today, European stocks recorded modest gains ahead of the US payrolls report, mirroring similar progress in Asian markets. This report is projected to reflect a hiring slowdown in September, which could lessen pressure on the Federal Reserve to hike interest rates further. Miners led the index following discussions between a Chinese iron-ore buying agency and global suppliers.

Energy stocks struggled due to concerns over demand and ‘s largest weekly fall since March. Shares of Royal Philips NV fell by 8.5% after agreeing to additional testing on certain devices. Despite minor losses in the and , US equity futures remained stable.

The nonfarm payrolls report is anticipated to show that US employers hired 170,000 workers in September, down from August’s 187,000. This contrasts with the weaker than expected ADP employment report. Investors, including Barclays Private Bank’s chief market strategist Julien Lafargue, are closely watching wage growth figures and job creation numbers.

The held at 4.74%, with Societe Generale (OTC:) strategist Kenneth Broux suggesting that upcoming payrolls data and inflation figures, including CPI numbers, will influence its movement. Asian stocks were lifted by gains in Hong Kong’s and optimism surrounding Golden Week consumption trends. San Francisco Fed President Mary Daly hinted that the central bank may keep rates on hold if inflation and the jobs market cool.

In the cryptocurrency market, rose slightly to $27,515.87 while Ether increased to $1,624.19. The rose by 0.7%.

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Forex

Dollar steady, sterling gains after UK inflation data

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Investing.com – The U.S. dollar steadied Wednesday after overnight losses, while sterling edged higher after the U.K. inflation returned to the Bank of England’s target for the first time in nearly three years.

At 04:25 ET (08:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded marginally higher at 104.885, having fallen as low as 104.762 the previous session.

Dollar stabilizes

The U.S. currency stabilized Wednesday after the previous session’s weakness as barely rose last month, pointing to lingering headwinds to momentum in consumer spending activity despite inflationary pressures showing signs of cooling.

“The reading is in line with our view that consumer spending has peaked in the US and should drive a broader softening in growth momentum into the second half of the year,” said analysts at ING, in a note.

The kept its benchmark interest rate in the 5.25%-5.50% range last week, but the central bank Fed also released updated economic projections that showed its officials had pared back their expectations for rate cuts this year, to one from the three seen in March.

However, markets are now pricing in a 67% chance the Fed will begin easing rates in September, according to the CME FedWatch tool, with nearly 50 basis points worth of cuts priced in for the rest of the year.

Trading ranges are likely to be limited Wednesday, with U.S. investors celebrating the Juneteenth holiday.

Sterling edges higher after inflation data

rose 0.2% to 1.2728, after data showed U.K. inflation returned to the Bank of England’s 2% target in May for the first time in nearly three years.

The drop in annual from April’s 2.3% reading was in line with expectations, and marked a sharp decline from the 41-year high of 11.1% reached in October 2022.

The holds its latest policy meeting on Thursday.

“The Bank won’t be cutting rates when it meets tomorrow. But we still have another report in July, and unless that’s a material surprise, we suspect it will still leave the BoE on track for a cut in August,” ING added.

fell 0.1% to 1.0735, with the euro continuing to be weighed down by political jitters in France and the wider bloc.

“EUR/USD has continued to stabilise but still seems to be lacking enough steam to meaningfully rebound given lingering political risk and fiscal concerns weighing on the common currency,” ING said.

Aussie gains on hawkish RBA stance  

In Asia, traded 0.1% lower to 157.77, with minutes of the Bank of Japan’s April policy showing policymakers debated the impact a weak yen could have on prices.

That said, the release did little to move the market as investors looked ahead to the next BOJ meeting in July.

traded 0.1% higher at 7.2569, while rose 0.3% to 0.6672 after a hawkish stance from Governor Michele Bullock in a press conference following the central bank’s rate decision.

 

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Exclusive-South Korea FX authorities aimed to cap dollar-won at 1,385, sources say

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By Cynthia Kim and Yena Park

SEOUL (Reuters) – South Korea’s foreign exchange authorities view the 1,385 level as a line in the sand for the won versus the dollar, two sources involved in the policy discussions told Reuters on Tuesday, citing recent measures to arrest the currency’s weakness.

The Bank of Korea and the finance ministry were preparing measures to intervene in the spot market had it breached the 1,385 level in late-May, the sources said, requesting anonymity due to the sensitivity of the matter.

“The authorities were waiting to see if the won weakens beyond the 1,385 level to decide the timing of measures to support the won,” one of the sources said, referring to his conversations with FX authorities.

A fast weakening of the won has been causing headaches for policymakers in Asia’s fourth-largest economy as the currency lost 6.5% against the dollar so far this year.

© Reuters. FILE PHOTO: A South Korea won note is seen in this illustration photo May 31, 2017.     REUTERS/Thomas White/Illustration/File Photo

The won hovered around 1,381.6 per dollar on Wednesday.

On May 31, the finance ministry said the Bank of Korea and the National Pension Fund are in talks to expand their FX swap line of $35 billion, a programme that allows the fund to borrow the central bank’s forex reserves instead of buying dollars in the onshore currency market.

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Volatility in these currencies related to political and monetary changes

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Investing.com – Political and monetary decisions have been bringing volatility to various currencies, including the , , and Japanese yen. While the French elections weakened the euro and strengthened the Swiss franc, Japanese monetary policy is negatively affecting the yen. This is the assessment of Julius Baer, which released a note to clients and the market on Tuesday.

The weakening of the euro and strengthening of the Swiss franc may have diminishing effects, according to the Swiss group, “since the franc remains well-balanced and the impact of the elections may be less significant than feared.” Despite having affected the euro, David Meier, an economist at Julius Baer, sees limited impacts on the currency.

“The euro had already started to weaken earlier this month when the European Central Bank began its easing policy. However, the policy expanded this weakness, with levels around 0.95 showing evidence that the franc is once again significantly overvalued,” he explains, estimating EUR/CHF at 0.97.

For the Japanese currency, the change in the Bank of Japan’s ultra-loose policy is expected to continue affecting the yen, Julius Baer believes. “The Japanese yen continued to weaken after the July meeting of the Bank of Japan, which maintained an unchanged policy stance, with more information on the gradual reduction of bond purchases postponed to the next meeting,” he recalls, considering that the normalization of BoJ’s monetary policy is very slow. Julius Baer estimates at 160 over the forecast horizon of 3 to 12 months.

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