The euro (EUR/USD) declined by 0.13% against the US dollar (USD) on Thursday as the US Jobless Claims report indicated a still healthy labour market and the ISM Manufacturing Purchasing Managers' Index (PMI) data was higher than expected.
Apart from the relatively strong macroeconomic reports, continuing safe-haven flows amid rising tensions in the Middle East boosted the greenback. In addition, the suspension of the dockworker strike may have also supported USD.
"Today is an example of how quickly the US dollar can recover. While Thursday's data was a little contractionary, the US remains the envy of other countries", said Juan Perez, director of trading at Monex USA.
Still, investors continue to maintain a rather dovish view of the Federal Reserve (Fed), expecting the regulator to deliver roughly 100 basis points (bps) worth of rate cuts over the next four months.
Meanwhile, the market anticipates the European Central Bank (ECB) to be less dovish than the Fed and deliver less than 80 bps worth of rate cuts by the beginning of 2025. Therefore, if US data continues to come out stronger than expected while the eurozone data disappoints, a large adjustment in monetary policy expectations may take place. Thus, a sizable decline in EUR/USD may be still ahead.
EUR/USD was relatively flat during the Asian and early European trading sessions. The biggest event today is the release of the US Nonfarm Payroll (NPF) report at 12:30 p.m. UTC. Jerome Powell, the Fed Chairman, has stressed recently that the US central bank was shifting its focus away from inflation onto the labour market. Today's data may largely determine the size of the Fed's next rate cut and the frequency of further cuts. The market generally expects a weak report, with a 0.3% rise in average earnings and around 140,000 new jobs created in September. A strong-than-expected report may trigger a disproportionately strong bearish reaction in EUR/USD. A weak report may trigger a sharp upward correction in EUR/USD, but it's unlikely to reverse a bearish medium-term trend. The key levels to watch are support at 1.10000 and resistance at 1.11500.
Gold Moves Sideways as USD Strengthens Amid Geopolitical Uncertainty
Gold (XAU/USD) moved sideways on Thursday as the US dollar (USD) strengthened and geopolitical risks increased.
Gold was steady around $2,656 on Thursday, hovering near record highs, as rising geopolitical tensions bolstered its safe-haven appeal. Market participants are closely watching the situation in the Middle East, with concerns growing after US President Joe Biden stopped short of explicitly condemning the possibility of Israeli strikes on Iran. Additionally, Tel Aviv pledged to retaliate against Iran while ramping up operations in Beirut amid its ongoing conflict with Hezbollah.
On Thursday, the US Dollar Index (DXY) reached a six-week high following robust US economic data. Purchasing Managers' Index (PMI) figures indicated that US services activity grew at its fastest pace in over a year in September. Meanwhile, recent job openings, private employment, and weekly jobless claims data highlighted a resilient labour market. Additionally, the dollar gained support from dovish signals in the U.K., Europe, and Japan.
XAU/USD rose during the Asian trading session. The US Nonfarm Payroll (NFP) report will be released today at 12:30 p.m. UTC. This data could impact the market expectations of a 50-basis-point rate cut by the Federal Reserve (Fed) in November, leading to a reassessment of dollar-based assets. The market forecast for September's NFP figures is to decrease towards 140,000. A stronger result may boost the US dollar, weighing down on gold, while weaker numbers could soften the greenback and support the gold price.
Middle East Conflict Sparks Sell-off in Bitcoin
Bitcoin (BTC) dropped over 6% this week as the escalating conflict in Gaza and Lebanon fuelled flows into safe-haven assets. Middle East tensions are driving a sell-off in risk assets, including Bitcoin.
Additionally, BTC/USD faced bearish pressure as stronger-than-expected US labour market data and Federal Reserve (Fed) Chair Jerome Powell's hawkish remarks supported the US dollar's (USD) recovery from its low. Tuesday's JOLTs Job Openings report revealed a surprising increase of 329,000, bringing the total to 8.04 million jobs created in August, up from a revised 7.711 million in July. Additionally, the ADP report on Wednesday showed private-sector employers added 143,000 jobs in September, surpassing expectations of 120,000. The data pointed to a still-resilient US labour market, prompting investors to reconsider the probability of a 50-basis-point rate cut by the Fed in November.
Another factor putting downward pressure on Bitcoin is the outflow of funds from Bitcoin exchange-traded funds (ETFs), which has continued for the third consecutive day. US spot Bitcoin ETFs saw net outflows of $54.13 million on Thursday, marking the third straight day of negative flows, totalling over $388 million. Ark Invest's ARKB led the outflows with $57.97 million, while Fidelity's FBTC lost $37.21 million. In contrast, BlackRock (NYSE:BLK)'s IBIT gained $35.96 million, and Bitwise's BITB and Invesco's BTCO saw inflows of $2.65 million and $2.44 million, respectively. Seven other funds, including Grayscale's GBTC, reported no flows.
BTC/USD rose in the Asian and early European trading sessions. Markets today are waiting for the US Nonfarm Payroll (NFP) data due at 12:30 p.m. UTC, which will cause increased volatility and affect the US dollar and all related pairs. Thus, today's report will be significant as it may support or disprove investors' dovish stance on the US interest rate path. If the NFP numbers are higher than expected, the US dollar will rise, while BTC may return towards $60,000. Otherwise, BTC/USD may rise towards $62,000 on weaker-than-expected figures.