As of Friday morning, the EUR/USD currency pair was trading in a range around the 1.1100 level. Traders were looking warily at the state of the US economy. The US Dollar is not strong right now, because everyone is scared that we are about to go into a recession. Expectations are building for a more dovish posture from the Federal Reserve. In the current market, traders are on high alert and watching each important economic indicator like a hawk. The US payrolls data and another widely-expected speech from Fed Chair Jerome Powell will likely set the tone for risky markets.
Today’s disappointing domestic payrolls data for February confirmed last week’s startling ex-US weakness. Analysts had been expecting 3.5% growth but that wasn’t the case. This disconcerting number has fueled more market jitters and deepened concerns over the US economy’s state of health. Furthermore, the Euro showed significant strength, especially with other currencies like the Australian Dollar, lending more credence to the strength of the EUR/USD pair.
Economic Indicators and Market Reactions
The latest figures released by Germany’s Federal Statistics Office revealed that Factory Orders in February showed no growth, suggesting stagnation within the country’s manufacturing sector. This development serves to underscore the serious economic challenges that Germany is facing as a whole. In February, the country’s Industrial Orders even declined by 0.2% y-o-y, backtracking a previous upwardly revised 0.1%. Such disruption would make the concerns expressed in our other trade war apprehensions not just likely, but certain. This development has escalated concerns of a recession and raised odds of earlier-than-expected rate cuts by the Federal Reserve.
These positive economic indicators have traders on the defensive, keeping them cautious as they await more data. Germany’s Factory Orders surprising no growth, further darkening the outlook for the whole of the Eurozone. This inertia leads us to doubt that the region’s economic recovery can last. Now, as traders digest these numbers, many are left wondering how such developments will impact currency valuations in the future.
Focus on US Payrolls and Fed Chair Powell’s Speech
Traders are looking forward to the coming release of the US Non-Farm Payroll (NFP) report. They were anticipating a forthcoming speech from Fed Chair Jerome Powell. These events are expected to provide vital insights into the state of the labor market and the Fed’s monetary policy trajectory. The current environment suggests that any signs of weakness in employment data could reinforce market expectations for a more accommodative monetary policy from the Fed, further weighing on the strength of the US Dollar.
We understand that 81.4% of retail investor accounts lose money when trading Contracts for Difference (CFDs) with this provider. This stat serves as a reminder about the kinds of volatility and risks that are often associated with trade given the uncertain economic environment. Traders are advised to exercise caution as they get set for what could be a volatile reaction to these important economic releases.
Global Trade War Concerns and Their Impact
The specter of a global trade war remains a key negative driver on financial markets, helping to raise overall fears of a recession. Even as debates about tariffs and reworking trade agreements continue, fear about the future of economic expansion has caused investors to flock to safer havens. This environment has increased expectations for Fed rate cuts, adding further duress on the US Dollar.
Pain in the US Dollar is showering strength across the EUR/USD pair for July. It’s that surge that is likely to be keeping it so lofty, propping up its position near 1.1100. This dynamic is representative of overall market sentiment, as traders are re-positioning their strategies based on what the existing, prevailing economic signals are telegraphing. U.S. Gold prices are under new supply pressures this Friday. Analysts say the scope for a larger crash seems to be fading as geopolitical and economic turmoil still fuels demand for safe-haven assets.