- US NFP will be the short-term driver of EURUSD price action.
- ECB and FOMC rate decisions will steer EURUSD over the medium-term
The latest US Labor report, scheduled at 12.30 GMT, is expected to show job growth of 160k in August after growth of 164k in July. The unemployment rate is expected unchanged at 3.7%, while average hourly earnings y/y are seen turning 0.2% lower to 3.0%. The market started to price-in better than expected job growth on Thursday after ADP employment change beat expectations – 195k against 148k. While the two numbers are not strongly correlated, the US job market remains robust and an upside beat today cannot be ruled out.
EURUSD Daily Price Chart (February – September 6, 2019)
IG Client Sentiment data show that of retail traders are 61.0% net-long of EURUSD, a bearish contrarian indicator. However, recent daily and weekly positional changes suggest that EURUSD may soon reverse higher.
ECB and FOMC Monetary Policy Decisions
While today’s NFP report will decide the short-term future of EURUSD, over the coming two weeks there will be important central bank rate decisions from the ECB and the Fed that will have a longer-term impact on the pair. The ECB meeting on Thursday September 12 is expected to see the central bank cut the deposit rate by 10 basis points to -0.50%, introduce a tiered bank rate and either announce or implement a fresh round of bond buying (QE) to re-boot the Euro-Zone economy. Lower interest rates and renewed QE will weigh on the Euro further.
And less than one week later – September 18 – the US Federal Reserve are fully expected to cut the Fed fund rate by another 0.25% to 1.75% to 2.0%, the second cut this year. There is a very small chance that the Fed may cut by 50 basis points – something that would please a vocal US President Trump – although a strong NFP number today may take that possibility off the table. This meeting will also see the release of the latest US economic projections which should give the market greater insight into the Fed’s thinking and the current state of the US economy.