US Dollar falls after employment data disappoints
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Daily Currency Update
Mixed economic data released today highlights sluggish growth across Europe, potentially limiting the euro's ability to capitalize on a softer US dollar when the Federal Reserve begins cutting rates this September. The euro remained stable on Wednesday as markets awaited key employment data from the US.In the UK, services and composite PMI data released yesterday were revised slightly upward. Improved sentiment is boosting hiring and spending across all sectors. While this may not prevent the Bank of England from lowering interest rates, it suggests that the pace of cuts will be slower than in Europe and the US, which could support the pound.
The US dollar weakened yesterday after the Job Openings and Labor Turnover Survey (JOLTS) report came in below expectations. August's figure was slightly above 8 million, but September's reading dropped to 7.6 million—a notable decline that points to a cooling US job market. If this trend continues, markets are likely to anticipate further rate cuts from the Federal Reserve.
Key Movers
Last week, ECB board member Isabel Schnabel emphasized the importance of policy "perseverance" and the ECB's commitment to meeting its inflation targets. With interest rates currently at the upper end of estimates, Schnabel noted that "the less certain we are about how restrictive our policy is, the more cautious we should be." This highlights the key challenge for the ECB council: balancing inflation control with stagnant growth.The UK economy continues to benefit from strong domestic and overseas demand. Barclays Bank reported yesterday that consumer spending on its credit and debit cards rose by 1% in August, reversing two months of decline. The British Retail Consortium also noted that August spending in shops increased by 1%, bucking the downward trend seen earlier in the summer. The pound remained firm throughout Wednesday's session.
Markets are now focused on the release of Non-Farm Payroll data, due tomorrow, following a softer-than-expected JOLTS report released yesterday, which indicated a slowing US job market. After the report, the dollar dropped by over half a percent against a basket of currencies. This has raised expectations that the Federal Reserve might cut rates by more than 25 basis points at its September meeting.
Expected Ranges
- GBP/USD: 1.3130 - 1.3180 ▼
- GBP/EUR: 1.1840 - 1.1885 ▼
- GBP/AUD: 1.9535 - 1.9590 ▼
- EUR/USD: 1.1050 - 1.1100 ▼