The U.S. Dollar started the week on a steady note, with mostly slight weakening across the board.
Overview
This stability comes after last week’s record highs in US equity futures, which have now taken a backseat as traders anticipate key data on the American labor market due this Friday. The labor market data is expected to have a significant impact on odds for further Federal Reserve interest-rate cuts, with a strong print potentially fueling risk-on bets. Investors are also keeping an eye on rising tensions in the Middle East and the upcoming third-quarter corporate results, which are set to kick off in mid-October
Monitoring Fed talk, the market will be closely watching remarks by Fed Chair Jerome Powell at the National Association for Business Economics conference on Monday. Additionally, various Fed and ECB policymakers are scheduled to speak throughout the week, providing further insights into global monetary policy. The Bloomberg Dollar Spot Index remained little changed, while the euro and British pound saw slight increases against the dollar. The Japanese yen, however, fell by 0.4%. With China being stimulus-driven, expect the MSCI Emerging-Market Currency to remain trading at near-record highs while hopefully conflicts in the Mideast region lower in tension.
What to Watch This Week…
- US Nonfarm Payrolls, Friday 8:30AM
- Monex USA Online is always open.
EUR ⇑
The Euro experienced a bit of appreciation as European Central Bank President Christine Lagarde expressed increased confidence in taming inflation. Speaking to lawmakers in the European Parliament, Lagarde highlighted that disinflation has accelerated over the past two months, and the ECB is optimistic about achieving its 2.0% inflation target in a timely manner. Data overnight indeed showed that her enthusiasm is indeed being backed by prices slowing down, if not flattening across the ancient continent.
This optimism is expected to influence the ECB’s monetary policy decisions in October, with potential momentum towards an interest-rate cut. Recent data showed slowdowns in consumer prices in Italy, Germany, Spain, and France, reinforcing the idea that the historic spike in inflation has been contained. However, Lagarde also noted that Europe’s economic recovery is facing headwinds, and the ECB will consider these factors in its upcoming policy meeting. It will be key to see how “dovish” the narrative could turn.
MXN ⇑
The Mexican Peso is trading higher in its key pairs at the start of the week, rebounding after an average decline of 1.5% last week. The peso is seeing gains against the Euro (EUR) following the release of below-expectations German inflation data, which indicated a slowdown in the bloc’s largest economy. This week, traders will be closely monitoring the peso’s performance against its main peers, with particular attention to political friction potential as Claudia Sheinbaum readies to begin her presidency. On Wednesday, we will take a look Manufacturing Purchasing Managers Index for September as well as a gauge for investments.
