EURUSD slumped below 1.0900 in Thursday’s American trading. The major currency pair weakened as the Dollar recovers strongly on soft US Initial Jobless Claims data for the week ending August 2.
Individuals claiming jobless benefits for the first time came in lower at 233,000 than estimates of 240,000, and the prior release of 249K. The DXY Dollar Index, which tracks the greenback’s value against six major currencies, bounced back to near 103.40.
Market Reactions and Speculations
While the near-term outlook of the shared currency pair remains uncertain, investors are confident that the Federal Reserve will choose an aggressive monetary policy stance to tame upside risks to potential US economic slowdown.
According to the CME FedWatch tool, 30-day Federal Funds futures pricing data shows that traders see a 50 basis points (bps) cut in interest rates in September as imminent. The data also suggests that the Fed will reduce its key borrowing rates by more than 100 bps this year.
Meanwhile, market participants have anticipated that the Fed could announce emergency rate cuts as the US economy is exposed to a recession.
On the contrary, economists at Goldman Sachs wrote in a note, “while market stress is noticeably higher than a week ago, our Financial Stress Index (FSI) suggests that there have been no serious market disruptions to date that would force policymakers to intervene.”
Market speculation that the Fed would deliver hefty rate cuts was bolstered by upside risks to job growth and a sharp contraction in the manufacturing sector.
EURUSD by TradingView
(Source: OANDA)
