EUR/USD Trading Update
The EUR/USD currency pair continues to trade in negative territory, remaining below the 1.0550 mark ahead of critical U.S. economic data. The pair is on the defensive, with traders eagerly awaiting September’s job openings and October’s ISM Manufacturing PMI data from the U.S. for new momentum before the Federal Reserve’s policy announcements.
On Wednesday, the EUR/USD pair continued its downward trend, reaching a daily low of 1.0540 just before the opening of Wall Street. The U.S. Dollar is gaining an advantage from the cautious sentiment as market participants anticipate the U.S. Federal Reserve’s monetary policy announcement later in the day.
EURUSD Daily Chart
Market Anticipation Ahead of Fed Announcement
Ahead of this announcement, stock markets are showing signs of caution, while Treasury yields are rising as investors predict the Fed will maintain its current stance, but are uncertain whether the central bank has finished with rate increases. Speculators will be focusing more on Chairman Jerome Powell’s commentary and any guidance provided during his press conference rather than the decision itself.
Employment Figures and Mortgage Applications Data
Due to a holiday in Europe, there was no local macroeconomic data released. However, the U.S. did release some significant employment-related figures. The ADP survey revealed that the private sector added 113K new jobs in the month, less than the anticipated 150K, but still higher than the previous 89K. In addition, MBA Mortgage Applications for the week ending October 27 declined by 2.1% compared to the 1% decrease in the previous week.
Upcoming U.S. Economic Data
The U.S. economic calendar has more to offer before the Fed’s announcement, with the release of the October ISM Manufacturing PMI, expected to remain steady at 49, and September’s JOLTS Job Openings. The latter is predicted to show 9.25 million openings for the month, a further decrease from the peak of 10.3 million in April. This report serves as an indicator of the tightness of the labor market, a key factor that the Fed closely monitors when making monetary policy decisions.
GBP/USD Dips Below 1.2150 as Markets Await US Data and Fed Decision
GBP/USD Experiences Bearish Pressure
The GBP/USD currency pair has experienced a slight downturn, slipping below the 1.2150 mark mid-week. This drop is attributed to the cautious market sentiment ahead of the release of ISM Manufacturing PMI data and the upcoming Federal Reserve policy decisions. These factors have allowed the US Dollar to maintain its position, putting pressure on the GBP/USD pair.
GBPUSD Daily Chart
Fluctuations in GBP/USD Amid Market Anticipation
Despite benefiting from an improved risk mood and reaching 1.2200 during Tuesday’s European trading hours, the GBP/USD pair succumbed to renewed US Dollar strength later in the day. As a result, the pair pulled back on its daily advance. As Wednesday begins, the pair is fluctuating around 1.2150 as investors prepare for the Federal Reserve’s policy decisions.
Market Focus on Federal Reserve’s Policy Decisions
With a stable Federal Reserve policy rate already largely accounted for, market participants will be closely examining Chairman Jerome Powell’s comments on the policy outlook and the language used in the statement.
According to the CME Group FedWatch Tool, there is a 27% chance of a 25 basis point rate hike in December. If the Federal Reserve cites the strong GDP growth in the third quarter and robust job growth in September as reasons for considering further tightening, the USD could gain against its competitors.
Conversely, if the Federal Reserve suggests that high bond yields could negate the need for another rate increase, this could lead to selling pressure on the USD and trigger an upward movement in the GBP/USD.
Upcoming Economic Data
Before the Federal Reserve’s policy announcements, the economic calendar will feature the ISM Manufacturing PMI and ADP Employment Change data for October.
Gold Stands Firm above $1,980 as Market Awaits Fed Decision
Gold’s Recovery Amid Market Uncertainty
Gold prices have rebounded to stand above $1,980, erasing earlier losses. This recovery comes as the benchmark 10-year US Treasury bond yield hovers near 4.9%. With focus shifting towards the Federal Reserve’s imminent interest rate announcement, XAU/USD is finding its footing in an uncertain market.
XAUUSD Daily Chart
Anticipation Ahead of the Federal Reserve’s Decision
Investors are exercising caution ahead of the Federal Reserve’s decision on interest rates. Despite widespread expectations that the Fed will maintain interest rates within the 5.25%-5.50% range, the gold price has experienced a sharp decline. The market is bracing for a potentially hawkish interest rate outlook, fueled by robust household spending and a strong labor market which continue to stoke inflation risks.
The Influence of Inflation and Wage Growth
Federal Reserve Chair Jerome Powell and his colleagues could keep the door open for further policy tightening. Progress towards easing inflation to the 2% target has slowed due to strong wage growth. With high purchasing power, US households are spending heavily, keeping the core Personal Consumption Expenditure (PCE) price index stubbornly high.
Broader Appeal for Gold Amid Global Tensions
Beyond the Federal Reserve’s decision, gold continues to hold broad appeal in light of ongoing tensions in the Middle East. As the Israeli army prepares for a potential ground incursion in Gaza and Israeli authorities reject calls for a ceasefire, the demand for safe-haven assets like gold remains strong.
USD/JPY Pulls Back from Annual High, Hovering Over 151.00
During Wednesday’s Asian trading session, the USD/JPY pair was seen trading around 151.20, marking a retreat from its annual high. This pullback occurred following the Bank of Japan’s (BoJ) decision to eliminate the 1% cap for the 10-year government bond yield on Tuesday.
USDJPY Daily Chart
After the yield curve control (YCC) adjustment, BoJ Governor Kazuo Ueda took a notably cautious stance. He voiced concerns about inflation failing to firmly hit the BoJ’s longstanding targets.
Hirokazu Matsuno, Japan’s Chief Cabinet Secretary, made verbal interventions aiming to support the yen. Matsuno emphasized the necessity for currency movements to reflect fundamentals in a stable manner, expressing disapproval of abrupt foreign exchange (FX) fluctuations. While he avoided commenting on specific Forex levels, Matsuno did not dismiss the possibility of implementing measures to address disorderly FX movements.
Adding further pressure on the Japanese Yen (JPY), the latest data released on Wednesday showed an unexpected drop in China’s Caixin Manufacturing Purchasing Managers’ Index (PMI) for October. The index fell to 49.5, down from September’s expansion at 50.6.
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