With limited data coming out of the UK this week, it was a good opportunity for both the EUR and USD to regain some ground lost to the Pound over the last couple of weeks. The main talking point in the Eurozone was the latest interest rate decision from the ECB. Approaching the decision, markets had priced in a 25-basis point cut at around 80%. In the US, the main talking points are expected later today in the form of non-farm employment data. However, we have already seen ISM PMI figures and ADP non-farm employment data, both of which caused a further sell-off in the USD.
As stated earlier, the ECB was widely anticipated to cut their interest rates by 25 basis points, so it was no surprise that market movement following confirmation of the cut was minimal. Analysts and traders awaited Lagarde’s speech for any indications of further rate cuts. However, Lagarde typically kept her cards close to her chest, resulting in limited market movement. The Pound maintained its elevated level from the last couple of weeks but failed to push to new heights.
In the US, the week began with the ISM Manufacturing PMI data released late Monday afternoon. Forecasts anticipated results of 49.8, just below the key indicator point of 50. However, the actual results came in at 48.7, considerably below both forecasts. This exacerbated the USD sell-off, with the Pound gaining further ground against the USD and seeing the rate soar to its highest level since March. The next key data point came on Wednesday with the ADP Non-Farm employment data, released a couple of days earlier than this afternoon’s employment data in the US. Markets had originally forecast a decline to 173k from the last figure of 188k. However, final figures came out at 152k, a significant drop and another reason for analysts to believe that the, once seemingly impregnable, US economic strength may be waning. This afternoon’s readings will provide further insight into this trend.
Looking ahead to next week, all eyes will be on the Federal Reserve following this week’s deflationary results. We will observe the Fed’s latest interest rate decision, with CPI data out earlier that day making for an interesting release. The Fed might consider their first rate cut following the recent poor results.
