Exclusive: EUR/USD Stabilizes Below 1.0800 Amid Key Data Anticipation
Today's market analysis on behalf of Rania Gule Market Analyst at XS.com
December 8, 2023 (Investorideas.com Newswire) The Euro-Dollar pair rose from its weekly lows near 1.0750 to touch levels above 1.0800 yesterday before returning to trade at 1.07850 at the start of Friday's session. This modest recovery was supported by weakness in the U.S. dollar amid market anticipation for the release of official U.S. employment data today.
In Germany, industrial production fell by 0.4% in October, contrary to expectations of a 0.2% increase. This report is expected to contribute to negative economic expectations for Europe. Meanwhile, the U.S. dollar declined as U.S. bond yields continued to decrease. The 10-year bond yield dropped from 4.17% to 4.11%, and the 2-year yield also decreased to 4.57%, approaching recent lows.
Simultaneously, yields in Europe moved negatively as markets anticipated the European Central Bank to cut interest rates in March next year. It is also expected that the Federal Reserve (Fed) will ease monetary policy in the future. I believe this contrast will negatively impact the Euro-Dollar pair in the medium and long term.
Under the influence of some improvement in risk sentiment ahead of the U.S. jobs report, which is expected to provide more clarity on the Fed's monetary policy future, the Euro-Dollar pair may experience fluctuations.
One of the significant reasons supporting the continued weakness of the Euro-Dollar, in my view, is the unexpected slowdown in the Eurozone economy in the third quarter of 2023. The Gross Domestic Product (GDP) reading came in at 0% every year, compared to the previous 0.1%, which is worse than expectations. Quarterly, the GDP contracted by 0.1%, in line with market expectations.
Additionally, ECB board member Isabel Schnabel changed her stance after three significantly low inflation readings in a row. Markets are pricing in a strong chance of a European interest rate cut earlier than expected, with investors leaning towards the first move in March 2024.
The non-farm payrolls (NFP) report today is expected to show an increase of 190,000 jobs, surpassing the 150,000 recorded in September. Unemployment rate, average hourly earnings, and the University of Michigan Consumer Confidence Index will also be released. In my opinion, traders will benefit from these figures, and there will be profitable trading opportunities around the Euro-Dollar pair during this weekend's trading.
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