Strong Dollar, Can the Euro Hold Up?
The EUR/USD pair traded slightly around 1.1580 during Wednesday's Asian session, after three consecutive days of weakness. The main pressure came from the strengthening US dollar, as markets began to reduce expectations that the Federal Reserve would cut interest rates at its December meeting. Currently, the CME FedWatch tool estimates the chance of a rate cut at only around 49%, down from 67% a week ago. The market is also awaiting the release of September's Nonfarm Payrolls (NFP) data, due on Thursday, which could trigger the next major move.
On the data front, initial jobless claims in the US showed 232,000 people filed for the first time, with continuing claims rising slightly to 1.957 million. ADP data also indicated that companies have cut an average of 2,500 jobs per week over the past four weeks. Richmond Fed President Thomas Barkin believes the labor market is becoming more balanced: companies are finding it easier to find workers, but layoffs are also starting to increase. He added that inflation has not increased, but it is also unclear whether it will steadily decline to the 2% target, so policy decisions are still being debated internally by the Fed.
On the other hand, the euro is trying to hold its ground amid pressure from the US dollar. Sentiment towards the European Central Bank (ECB) policy tends to be cautious. Markets widely expect the ECB to hold interest rates in the near term, as the eurozone economy is considered relatively stable and inflation is nearing its target. However, without major positive surprises from European data, the euro's room for strengthening against the dollar remains limited, so EUR/USD is at risk of further weakening if US data again supports dollar strength. (az)
Source: Newsmaker.id
