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Market Analysis – EURUSD

The US Dollar is increasing not only against the Euro but also against its main competitors in the market. The Euro has significantly decreased against the US Dollar as we approach today’s main events. Yesterday the instrument declined by a significant 83 pips measuring over a 0.60% decline, the largest decline recorded since April this year. Today the asset continues to decline during this morning’s Asian Session, the decline so far has measured 13 pips. The exchange rate is likely to be largely influenced by today’s fundamental announcements from both the US and EU.

Investors are focused on data from the labor market, which turned out to be positive and higher than previously expected. The number of initial jobless claims again slowed down the growth rate more than experts predicted. The indicator decreased from 405,000 to 385,000 instead of the projected 390,000. May data on employment from ADP recorded its significant growth by 978,000, against the forecast of 650,000. 

Thus, the labor market continues to recover, which raises new questions for the US Federal Reserve’s monetary policy. Previously, most regulator officials believed that rising inflation was not a sufficient reason for tightening monetary policy, as employment and unemployment remained weak. However, the latest data may persuade them to reduce the volume of bond buybacks earlier than previously planned. For this reason, the market will be highly evaluating today’s employment figures. Without doubt, exasperating the Federal Reserve during conferences in the coming days thereafter regarding its stance on their Monetary Policy. 

Looking now at the European Union and its State members. May Services PMI released today was positive. The index for the Eurozone rose from 50.5 to 55.2 points, and for Germany – from 49.9 to 52.8 points. Experts attribute the growth in rates to the gradual easing of quarantine restrictions and an increase in vaccination spread in European countries. Moreover, government support measures and a soft monetary policy give hope for further growth in business confidence. We should also note the positive comments from leading European economic officials. 

The European Central Bank President, Christine Lagarde, said yesterday that the regulator will support the Eurozone in its recovery from the double recession and will maintain favourable financing conditions throughout this period. German Economy Minister Peter Altmaier noted that the country has overcome the coronavirus crisis, and this year the economy may reach 4.0% growth. For now, the government should consider how to phase out its emergency stimulus measures.

The dollar today is strengthening against all its main competitors except the British Pound where the US Dollar is showing ambiguous dynamics, the US Dollar Currency Index has also formed a bullish candlestick today. The Euro today is weakening against its main competitors and has formed its fourth bearish candlestick on the Euro Currency Index which measures against the US Dollar, Pound, Yen and Franc.

As previously mentioned the price movement is indeed strongly in favour of the US Dollar so far but traders need to be cautious of the figures which are due to be released this afternoon. This afternoon the US is due to release the Non Farm Payroll figure, the Unemployment Rate and the Average Hourly Earnings. All three figures are known to be high price drivers and increase the level of volatility. In addition to the above, the ECB President is also due to speak again this afternoon. 





Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing investing advice or a recommendation, or an offer of or solicitation for any transactions in financial instruments or a guarantee or a prediction of future performance. Past performance is not a guarantee of or prediction of future performance.
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