Date: 01 Nov 2019

The U.S Dollar continued to trade on the back foot against a basket of major currencies on Thursday, despite the latest FOMC policy statement signalling that the central bank may start to pause its ‘rate adjustment cycle’. The greenback suffered its heaviest losses against the euro and the Japanese yen currency, as traders reacted to the latest rate cut from the FED and Sin-U.S trade news.

Key language changes inside the FOMC monetary policy statement and two FOMC members dissenting to the latest twenty-five basis point rate cut earlier this week, provided the clearest signal yet that the U.S central bank is likely to keep interest rates at current levels until December.

Policy members noted that fears over the worsening global slowdown and below-trend inflation triggered the FOMC to act. However, most economists now agree that the latest interest rate cut from the Federal Open Market Committee this week could be the last this year.

It is also noteworthy that the bar is likely to be set much higher to warrant another rate cut, now that the FED rate is below neutral. Advanced GDP data from the U.S economy this week showed quarterly growth outpacing expectations, with a 1.9 third-quarter print.

Today’s monthly job report is likely to provide further clues as to the health of the United States economy, with average wage earnings under particular scrutiny, due to the correlation it has to individuals spending power and the FOMC’s emphasis on inflation.

Economists are predicting a headline number slightly above 100,000, while average hourly earnings are expected to show a 0.3 percent monthly increase. A 100,000 headline number should provoke a neutral reaction, while a solid increase in wage earnings should be broadly positive for the greenback in the aftermath of the jobs report.

 

EUR/USD Daily Candlestick Chart |Source: ActivTrader

EUR/USD Daily Candlestick Chart |Source: ActivTrader

 

The euro has performed its first monthly increase against the US dollar since the summer, following a protracted slump over German growth fears and the ECB implementing QE once again. The rally is likely to face strong resistance around the 1.1260 level, and this may be the area where traders start to book profits into the year-end.

 

Written by Nathan Batchelor, External Analyst, ActivTrades

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