The Perfect Storm: Fed Interest Rate Followed by NFP

EUR/USD in Limbo as Traders Await Key Data

We are headed towards what could be the Fed’s last rate hike of the year but if that isn’t enough, the Non-Farm Payrolls report will spice things up even more. And it doesn’t stop here: the European Central Bank will announce the main refinancing rate and the Eurozone CPI will provide valuable information about the frustrating inflation that’s been plaguing the economy.

With all this plethora of information, it’s safe to assume that the US Dollar will break out of the lethargic range that’s been confining it. So without further ado, let’s take a closer look at this week’s market movers.

Key Data for the Week Ahead

Banks across Europe are closed Monday, celebrating Labor Day, which means that volatility will be affected and the Euro and Pound will be prone to irregular movement. On the US Dollar side, the ISM Manufacturing PMI comes out at 2:00 pm GMT.

Tuesday at 9:00 am GMT the Eurozone Core CPI Flash Estimate comes out, with an expected drop to 5.6% from 5.7%. We will see how it affects the ECB’s stance on rate hikes going forward; as for this ECB meeting, the decision is probably already made, thus the CPI won’t affect it.

Wednesday at 6:00 pm GMT, the FOMC Statement comes out, containing the outcome of the interest rate vote and details about the reasons that influenced it. The rate is expected to be increased to 5.25% from the current 5.00% and this will likely be the last hike of the year. Half an hour later, Fed Chair Powell will hold the usual press conference.

Thursday at 12:15 pm GMT the ECB will announce the interest rate as well. Markets are expecting a rise to 3.75% from the current 3.50% and according to current predictions, this will not be the last increase. At 12:45 pm GMT, ECB President Lagarde will hold the usual press conference.

Friday it’s time for the U.S. jobs data: at 12:30 pm GMT, the Non-Farm Payrolls report comes out, together with the Average Hourly Earnings and the Unemployment Rate. Job creation is expected to slow down quite a bit: from the previous 236K to 180K.

Technical Outlook – EUR/USD

After failing to break 1.1000, the pair has been stuck in a 200-pip range between 1.0900 and 1.1100. The movement has been choppy and mostly sideways. EUR/USD is currently trading in the middle of that range, at 1.0005.

This week, the technical side will be vastly overshadowed by the fundamentals, considering all the data that’s coming out. The levels to watch are the big round numbers at 1.0900, 1.1000, and 1.1100. A break of the upper or lower barrier will likely trigger an extended move in that direction.