The dollar remains under pressure this week, with bond yields sinking further in US trading yesterday. The revision to the non-farm payrolls here was a key factor, alongside the FOMC meeting minutes as well. A rate cut is certainly coming next month but traders are also growing more confident about a more dovish Fed in the year ahead.
Looking to June next year, traders are pricing in ~191 bps of rate cuts in the next seven meetings. That’s a little more than a 25 bps rate cut at each meeting from next month up until the first half of next year.
In any case, the point is that the dollar is still looking rather vulnerable and may be poised for further losses this week.
EUR/USD is looking to hold a break at its highest since July last year, targeting the 1.1200 mark next. Meanwhile, GBP/USD is slowly inching towards its July high of 1.3140-42 next. And stronger breaks there could see both pairs free up room to roam to its highest since 2021.
Besides that, USD/CAD is inching below its May and July lows as well as its 200-day moving average under 1.3600. That will see the pair lose altitude with little support holding a further drop from there.
And we have USD/JPY moving back to test 145.00 and AUD/USD also looking to its July highs near 0.6800 currently.
It’s all working against the dollar at the moment.
Looking to the day ahead, the dollar flows will continue to be a focus especially with US PMI data coming up. But in European trading, the euro will be under the spotlight with French and German PMI on the agenda. Barring any surprises though, it should reaffirm odds for a rate cut by the ECB next month – even if the economy holding up or stagnating somewhat.
As such, broader market sentiment will be eyeing the data from the US once again today.
0715 GMT – France August flash manufacturing, services, composite PMI
0730 GMT – Germany August flash manufacturing, services, composite PMI
0800 GMT – Eurozone August flash manufacturing, services, composite PMI
0830 GMT – UK August flash manufacturing, services, composite PMI
1000 GMT – UK August CBI trends total orders
That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.
