EURUSD moves sideways ahead of Powell's speech
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EURUSD
EURUSD traded bearish on Thursday. The pair went into moderate correction towards the 1.11000 support level due to higher-than-expected U.S. Composite Purchasing Managers' Index (PMI) data, eventually losing 0.35%.
Possible effects for traders
The S&P Global U.S. Composite PMI numbers fell slightly towards 54.1 in August, a four-month low from 54.3 in July but still above market expectations of 53.5. The U.S. dollar (USD) recovered from a 13-month low against the euro on Thursday, ahead of today's Federal Reserve (Fed) Chair Jerome Powell's speech. The U.S. dollar has been declining due to concerns about a potential economic slowdown and expectations of the Fed's possible interest rate reduction. Brad Bechtel, global head of Foreign Exchange at Jefferies, stated that the U.S. dollar had been under significant pressure but was now reaching a point where it had become significantly oversold. Traders have now priced in a 25% likelihood of a 50-basis-point (bps) interest rate cut next month, down from 38% the previous day. Meanwhile, the chances of a 25-bps reduction stand at 75%, according to data from the CME Fed Watch Tool.
Traders will closely monitor Powell's remarks at the Jackson Hole symposium today for any new insights into the U.S. interest rate path. Powell may not provide extensive details in his remarks, given that the August jobs and inflation figures will be released after his speech, before the monetary policy meeting in September. The Fed's July meeting minutes, released on Wednesday, indicated that a majority of officials supported a September reduction. Philadelphia Fed President Patrick Harker stated on Thursday that he supports a September rate reduction, provided that the data continues to perform as expected. Boston Fed President Susan Collins also supported this stance. EUR USD moved sideways during Asian and early European trading sessions, just below the 1.11300 resistance level.