The European Central Bank (ECB) has raised interest rates by 25 basis points, marking its tenth consecutive rate hike since July 2022 and bringing the total increase to 450 basis points. The ECB is primarily concerned about high inflation levels, both current and projected, with concerns extending into the future.
Will the NFP help the greenback?
2023-09-01 • Updated
The odds of a final interest rate hike by the US Federal Reserve (Fed) this year have dropped after US job openings hit their lowest levels since early 2021. This has led to a correction in the US Dollar as traders reduced their bets on further rate hikes. Following Fed Chair Jerome Powell's hawkish speech at the Jackson Hole Symposium, the probability of a November rate hike briefly rose to 57% but has now fallen to 40% due to the disappointing job openings data. The focus is now on August's upcoming Nonfarm Payrolls report, which is expected to show 170K jobs added and a steady 3.5% Unemployment Rate. Average Hourly Earnings, a gauge of wage inflation, will also be closely watched for its impact on the Fed's rate trajectory.
US Dollar - D1 Timeframe
After the initial reaction away from the supply zone, the US Dollar is heading back towards the same zone for a retest, which could serve as a basis for further decline toward the 50-day moving average support. Considering that experts are expecting a lower NFP outcome compared to the previous month, we can further project a likelihood of a weakness in the Dollar.
EURUSD - D1 Timeframe
EURUSD recently reached the demand zone, which immediately triggered a bullish reaction. At the moment, however, the price is retesting the trendline support as we await the outcome of the NFP report later today. It should be noted, though, that my sentiment on this remains purely bullish.
GBPUSD - D1 Timeframe
GBPUSD has been prepping for a bullish impulse for quite a while. The current price movement on GBPUSD seems to be forming a slight retest of the 100-day moving average before embarking on a bullish run. In the meantime, I believe the NFP report and its aftermath would set a clear precedent on what to expect from GBPUSD in the coming weeks.
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The upcoming August inflation data may send mixed signals. The 12-month headline inflation rate is expected to rise to 3.6%, causing concerns for the Biden administration. However, core inflation, which excludes food and energy prices, is projected to decrease to 4.3%, aligning with the Federal Reserve's goals. Past price trends influence both figures, so looking at recent data for a more accurate picture is crucial.
Here we go again, my friends. It’s time to look critically into the future of what trading opportunities September might have in store for us. As always, it is essential to note that the views expressed here are mine and should not be considered financial advice without proper examination.
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