Markets quiet ahead of the NFPs release, Euro down a bit

Recently, the labor market has been one of the more resilient aspects of the American economy, with indicators mostly showing that companies are holding on to workers rather than laying them off, while also being very cautious about hiring. Nevertheless, the report is expected to show an increase of 55K jobs for August. We shall see whether there is any movement in the unemployment rate, which is now at 4.1%. While we look forward to the reaction, odds of a 25-basis-point rate cut at the Fed’s September 16th meeting stand at just 54.0%. It is possible that an impressive print may increase those chances and improve the USD’s overall value. At the time of writing, the Bloomberg Dollar Spot Index held at its weakest point since May 11th.

While labor remains a crucial component of the financial environment, many of the market’s concerns center on the sustainability of debt across nations, historically high Treasury bond yields, and the negative effects of unresolved conflicts in the Middle East and on the Eastern Front, as Russia and Ukraine continue fighting. Furthermore, FX intervention could occur, as it continues to be suggested that downward pressure on the Japanese yen can be alleviated. The U.S. Treasury has used a mix of euros and dollars to conduct operations.

As the Labor Day weekend arrives, it provides three days of opportunity for the narrative to shift, with a focus on the potential for armed aggression to cease and for energy and business outlooks to improve. For more detail on how the greenback behaved throughout August and what may come, the September Currency Outlook is available.

What to Watch This Week…

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The complete Economic Calendar can be found here.

EUR

The Euro is being held back after making slight gains, as the dollar has swung in mixed directions. It is particularly disappointing for the euro’s value that the fundamentals of the eurozone economy are not offering good news. July retail sales registered a surprising contraction of 0.6% instead of expanding by 0.2%, as estimated. It is possible that, as in the prior month, a revision may change the figure. June originally showed a contraction of 0.3% but was then revised upward to an advance of 0.2%. However, the dip does not seem to be much of an error and can be interpreted as a sign that consumption is under pressure. With the European Central Bank basically guaranteed to raise borrowing costs by increasing interest rates at the ECB’s September 10th gathering, it may become even tougher to see an uptick in spending. For more detail on the eurozone and beyond, please read Monex Europe’s take on what may happen for the remainder of a long and eventful month.