Continued Gains for EUR/USD
The Euro to US Dollar (EUR/USD) pair is making strides, consolidating its weekly gains above the 1.0600 mark in Friday’s European trading. This upward trend is supported by a renewed weakness in the US Dollar and the US Treasury bond yields.
As we move forward, market watchers are keenly awaiting the US Nonfarm Payrolls (NFP) data for a fresh directional impetus. After a successful Thursday where the EUR/USD closed positively above 1.0600, the near-term technical outlook remains optimistic, with the bullish bias intact ahead of October’s jobs report from the US.
US Dollar Sell-off Continues
The sell-off of the US Dollar resumed on Thursday, following the Federal Reserve’s policy announcements made late Wednesday. The Dollar’s value further dipped against its rivals after US data showed a decline in Unit Labor Costs by 0.8% on a quarterly basis in Q3, coupled with a rise in weekly Initial Jobless Claims to 217,000 from 212,000.
US Nonfarm Payrolls and Market Predictions
Market predictions for the US Nonfarm Payrolls (NFP) suggest an increase of 180,000 in October, following an impressive surge of 336,000 in September. Fed Chairman Jerome Powell, during the post-meeting press conference, indicated that policy decisions would be based on the “totality of data, balance of risks”.
According to the CME Group FedWatch Tool, markets are currently pricing in a 20% probability of another rate increase in December. While a robust NFP reading might not significantly improve these odds, it could provide a temporary boost to the USD.
However, if the NFP disappoints with a print at or below 150,000, the market positioning suggests potential room for further USD weakness. In such a scenario, analysts predict that the EUR/USD could test the 1.0700 mark.
GBP/USD Bullish Momentum and Bank of England’s Stance
The British Pound to US Dollar (GBP/USD) pair registered gains on Wednesday, showing bullish momentum after dropping below 1.2100 earlier in the day. The pair continued to climb higher toward 1.2200 on Thursday but lost its traction as investors held back from taking large positions ahead of the Bank of England’s (BoE) monetary policy announcements.
GBPUSD Daily Chart
In Wednesday’s announcement, the Federal Reserve held the policy rate steady at 5.25%-5.5%, as widely expected. Despite Fed Chairman Jerome Powell not ruling out another rate hike in December, markets remained unconvinced. This led to a nearly 4% fall in the benchmark 10-year US Treasury bond yield on the day and the US Dollar weakening against its major rivals, allowing GBP/USD to turn north.
The BoE is forecasted to keep the key rate unchanged at 5.25% for the second consecutive meeting. Investors will be closely examining revised projections and the statement language to assess whether the BoE has reached the end of the tightening cycle.
USD/JPY Consolidation and Market Uncertainties
The US Dollar to Japanese Yen (USD/JPY) pair struggles to build on the overnight modest bounce from the 149.85-149.80 region. It oscillates in a narrow trading band during Friday’s Asian session.
USDJPY Daily Chart
Spot prices are currently just below mid-150.00s, nearly unchanged for the day, as traders seem reluctant to place aggressive bets amid uncertainties over the Federal Reserve’s rate-hike path. As we move forward, the market will be looking towards the US NFP for fresh impetus.
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