Although the latest US non-farm payrolls report disappointed market expectations this failed to boost the Euro US Dollar exchange rate for long.
The fact that the unemployment rate had edged higher in August from 4.3% to 4.4% initially discouraged investors, highlighting the slack that remains in the US labour market.
However, the ‘Greenback’ soon recovered ground as markets played down any negative impact this data could have on the outlook of the Federal Reserve.
As Paul Ashworth, chief US economist at Capital Economics, noted:
‘August’s employment report was disappointing across the board but, given the potential seasonal problems – with weak initial readings in August subsequently revised higher in previous years – it isn’t going to have any meaningful impact on the Fed.
‘With the survey evidence still strong and third-quarter economic growth on course for another decent gain after the second, there is no reason to believe that the modest drop-off in employment growth is the start of a more serious downturn.’
With Fed policymakers still more preoccupied by developments in domestic inflation the chances of a December interest rate hike remained largely intact in spite of this downside surprise.
Even so, as the Trump administration continues to pursue the idea of a border wall with Mexico the US Dollar could come under pressure from any domestic political developments.
Eurozone PMIs Unlikely to Encourage ECB Hawkishness
The mood towards the Euro remains generally muted at this juncture, with the European Central Bank (ECB) looking set to maintain a neutral to dovish bias in the near future.
While the finalised raft of Eurozone manufacturing PMIs proved largely encouraging this did not stop markets from revising bets on the prospect of an imminent start to the tapering of the quantitative easing program.
As a report emerged that the ECB sees a possibility of its quantitative easing plan not being ready before December this added to the bearishness of the single currency.
Monday’s Eurozone producer price index data may not offer the EUR USD exchange rate any particular rallying point, especially if the figures disappoint.
Any fresh signs that inflationary pressure within the currency union could be easing are likely to weigh heavily on the appeal of the single currency.
On the other hand, an uptick here is unlikely to boost confidence in the prospect of the ECB turning more hawkish any time soon.
Further volatility could also materialise in response to the finalised Eurozone services PMIs and gross domestic product data.
Current EUR USD Interbank Exchange Rates
At the time of writing, the Euro US Dollar exchange rate was slumped in the region of 1.1871. Meanwhile, the US Dollar Euro exchange rate was making steady gains around 0.8421.