FX Market Update: US Data Takes Centre Stage as Sterling and Euro Remain Under Pressure.

• USD – Has regained some ground, supported by a stronger ISM manufacturing reading and renewed focus on upcoming US labour market data, with Friday’s payrolls likely to be the key catalyst.

• EUR – Has steadied after giving back some recent gains, with limited Eurozone data leaving the euro largely driven by expectations around US data and interest-rate differentials.
  

• GBP – Remains slightly softer against both USD and EUR, with a quiet domestic data calendar leaving sterling vulnerable to US developments and ongoing fiscal uncertainty ahead of October’s Budget.

USD:

The dollar regained some ground yesterday as the impact of recent yen intervention faded and markets turned their attention towards a busy week of US economic data. The positive momentum was supported by a stronger-than-expected ISM manufacturing index, which rose to 55.6, driven in particular by a significant improvement in the employment subindex.

The main focus today will be the JOLTS job openings report for June, with vacancies expected to ease slightly to around 7.45 million. However, Friday’s non-farm payrolls will be the key event for markets, with the data likely to provide further clues on the strength of the US labour market and the Federal Reserve’s future rate path. Meanwhile, ongoing US-Iran negotiations continue to influence oil markets and could add further volatility to the dollar.

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EUR: 

EURUSD has steadied this morning after surrendering some of its recent gains during yesterday’s session. Eurozone data remains relatively light, with the main releases consisting of French budget figures and a stronger-than-expected employment change report from Spain.

Attention will now turn towards tomorrow’s Eurozone PPI data, while US economic releases are likely to remain the more significant driver of currency markets. With limited domestic catalysts, the euro is likely to remain sensitive to shifts in expectations around US and European interest rates. EUR could therefore trade within a relatively narrow range in the near term, with the direction of US data likely to determine the next significant move.

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GBP: 

Sterling edged lower against both the dollar and the euro yesterday, with a quiet domestic data calendar leaving the pound without a clear catalyst of its own. As a result, sterling is likely to be primarily driven by developments in the US today, particularly the JOLTS employment data and wider expectations around Friday’s non-farm payrolls.

Political newsflow has steadied somewhat, with Burnham’s government beginning preparations for October’s important Budget announcement. Meanwhile, with relatively few Bank of England speakers scheduled this week, monetary policy is unlikely to provide a major near-term catalyst for sterling. Without a meaningful domestic driver, GBP may remain vulnerable to broader movements in USD and changing expectations around global interest rates.

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