Fed to Cut Rates Next as Non-Farm Payrolls Tank
EUR/USD Snaps a 5-Day Bearish Streak. Uptrend Resumption Next?
The U.S. economy is showing signs of slowing down as the new tariffs are starting to weigh on businesses and inflation. Last week’s Non-Farm Payrolls report showed that only 73K new jobs were created, much fewer than the expected 106K. Surprisingly enough, the previous number was revised from 147K to a mere 14K. In light of this revision, Friday’s report was better than the previous but still way below expectations.
Traders are now speculating that the Fed will cut the rate at their next meeting, in September. Trump’s pressure on Fed Chair Powell and constant calls for a rate cut will probably play a major role in the next rate decision. At the time of writing, there’s an 80% chance of a cut in September, according to the CME FedWatch tool. Before the jobs report, the probability of a rate cut was around 45%.
Economic Calendar Highlights
Things are slowing down as far as the economic calendar is concerned, but this does not necessarily mean that we will have a calm week. This is mainly because Trump’s tariff deadline was August 1, but the new levies will come into effect this Friday, suggesting that there is still room for some last-minute negotiations.
The ISM Services PMI (Purchasing Managers’ Index) is scheduled for release on Tuesday at 2:00 pm GMT. The report shows the opinions of purchasing managers from the Services sector about overall business conditions in this sector; its impact is higher if there’s a notable difference between the forecast and the actual number. For this release, the forecast is 51.5, and the previous was 50.8.
The Bank of England will announce the interest rate on Thursday at 11:00 am GMT. A 0.25% cut is expected, from 4.25% to 4.00% but this is likely already priced into the market, so it will be important to watch the Monetary Policy Report, which contains the outcome of the rate votes and insights into the reasons that determined it.
Technical Outlook – EUR/USD
The dollar weakened as soon as the NFP came out, snapping a 5-day win streak that saw it take the euro from 1.1770 to 1.1400. Friday’s price action established 1.1400 as support, and at the moment, the euro bulls are trying to break the previous resistance located at 1.1575.
A successful break may suggest that the uptrend will continue, but there is a very strong resistance zone located at the double top, so it will take a strong effort for the bulls to break it.
The effects of the weak NFP will linger for a while, and this, coupled with the high probability of a rate cut, will weigh on the greenback. Any news regarding tariffs will affect the US Dollar and will be visible on the charts.
