Home Daily Commentaries Markets brace for critical US employment data

Markets brace for critical US employment data

Conor Fleming
Written by
Conor Fleming

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor spearheads initiatives to encourage businesses in Germany, Switzerland, and Austria to hedge their foreign currency risks with OFX.

| Friday 4 October, 2024

Daily Currency Update

There was no economic data released in Europe yesterday, causing the Euro to trade sideways to slightly lower due to a stronger Dollar driven by shifting interest rate expectations. The ECB meets on the 17th of this month to set monetary policy, and it is widely expected that we will see a 25 basis point cut in borrowing costs. This will be warmly received by the majority of European countries whose growth has stalled through 2024.

The Pound hit a two-week low yesterday after Bank of England Governor Andrew Bailey said the Central Bank could become more “activist” on rate cuts if they see positive news on falling inflation. This rhetoric has taken the shine off the Pound, which fell over 1.2% yesterday. Additional weakness for the Pound is possible as markets adjust expectations for rates to remain high in the UK.

As geopolitical tensions continue to rise, there has been a flight from investors into “safe haven” US Dollars. Private payrolls figures released earlier this week were stronger than expected, and if today’s non-farm payrolls, due later, are higher than expected, this will be critical for determining the pace of Federal Reserve easing over the rest of 2024.

Key Movers

The Euro slid to a three-week low this week as normally hawkish ECB policymaker Isabel Schnabel took a dovish tone on inflation, cementing bets for the ECB to cut rates this month. ECB council members have recently increased their rhetoric, expressing concern about growth stalling in Europe and inflation falling below 2.0%. It is entirely possible that markets may get a surprise later this month if the ECB decides to cut rates by more than the expected 25 basis points.

The latest Bank of England Decision Maker Panel (DMP) survey showed yesterday that, one year ahead, expected CPI inflation data by UK firms dropped by another 0.1% to 2.6% in the quarter to September. Expected wage growth remained stable at 4.1%, but business uncertainty fell in the three months to September. Importantly, this figure is very closely watched by the Bank of England’s Monetary Policy Council (MPC).

Former President of the New York Federal Reserve Bank, William Dudley, said that with present economic data and falling inflation, a 25 basis point cut by the Central Bank is the “only healthy way forward.” US services sector activity jumped to a two-year high amid strong growth in new orders, though its measure of services employment fell, indicating a slowdown in the US labor market.

Expected Ranges

  • GBP/USD: 1.3105 - 1.3170 ▼
  • GBP/EUR: 1.1885 - 1.1930 ▼
  • GBP/AUD: 1.9165 - 1.9215 ▼
  • EUR/USD: 1.1010 - 1.1055 ▼

Written by

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor first embarked on his financial career journey as a trainee dealer in BNP Paribas in the early 90s. His professional journey also took him to New York, where he assumed the role of Head of Sales with an Irish bank for a few years. During his tenure at both banks, he was invited to several interviews on Irish television to discuss market turbulence, the factors driving volatility and insights into what could be expected as events unfolded.

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