The bullish trend of the EUR/USD exchange rate continues, with signs of its stabilization just above 1.0750. The driving factor behind this is a weakening USD due to slower-than-expected job growth in the US. This has sparked conversations about a potential September rate cut by the Federal Reserve, enhancing the Euro’s edge in the market.
Amid this, eyes are on the forthcoming economic updates from the Eurozone. Experts suggest that maintaining the 1.0750 junction could pave the way for additional gains, ensuring a cautious approach due to expected market volatility.
The currency pair stayed positively for four consecutive days around 1.0765 early this week. The USD’s downturn has given room for this pair to perform positively, all while investors eagerly anticipate economic indicators like Germany and the Eurozone PMI data, along with the Eurozone PPI.
These markers, particularly the PMI data and Eurozone PPI, will provide critical insights into the currency pairs’ future performance. They are considered potential game-changers with their outcomes shaping overall market sentiment.
The latest data from the US Bureau of Labor Statistics indicates a notable slowdown in US job growth.
Euro amplifies as US labor expansion decelerates
In light of these trends, concerns are raised about the ongoing recovery from the COVID-19 pandemic and the Federal Reserve’s potential decisions regarding interest rates.
This economic outlook increases the likelihood of a September rate reduction by the Federal Reserve. Signs indicate that this scenario could benefit the Euro while putting pressure on the USD, encouraging business growth while also attracting investors to the European market.
Forecasts for the Eurozone Services PMI and Composite PMI anticipate stability at 52.9 and 51.4 respectively. The Eurozone PPI for March estimates an improvement from -8.3% to -7.7% year on year. Given these expectations, any deviation from the projected figures will likely influence the direction of the Euro.
However, concerns are raised regarding a potential divergence in interest rate cuts between the ECB and the Federal Reserve. Such divergence could prove “particularly negative” for the Eurozone, potentially triggering sell-off pressure on the Euro against the USD and intensifying the Eurozone’s vulnerability to external economic shocks. Furthermore, the implications of this divergence could require strategic policy decisions from central banks and governments to mitigate associated risks.
