Global overview
The euro fell overnight, despite a hotter than expected inflation reading, as a key ECB board member warned on a growth slowdown. The USD gained in Europe but fell in Asia. Tonight’s US non-farm payrolls will be key for the greenback.
Euro lower on ECB warning
The euro dominated market action overnight with a sharp fall after European Central Bank board member Isabel Schnabel pushed back on rate hike expectations.
Earlier this week, hotter inflation in Spain and Germany caused markets to drive the likelihood of an ECB rate hike this month to more than 50%.
Overnight, Eurozone headline annual inflation was reported at 5.3% versus 5.1% expected and the EUR initially gained.
However, Schnabel caused the EUR to fall by saying that weakness in the labour markets suggests “growth prospects…weaker than foreseen in the baseline scenario of the June Eurosystem staff projections”.
The euro fell across markets with the EUR/USD down 0.7%.
USD weaker in Asia
In other markets, the US dollar was mostly lower across Asia, as markets reacted to this week’s disappointing US data.
The Chinese yuan extended this week’s rebound from near 16-year lows with the USD/CNH down 0.4% overnight.
The Australian and New Zealand dollars saw small gains with markets on edge ahead of tonight’s key US non-farm employment report.
August jobs might be volatile
The US dollar’s volatile week, which has broadly seen the world’s most traded currency turn from three-month highs, is likely to continue with the US non-farm employment report due at 10.30pm AEST.
The forecast of 170k new jobs is the lowest since January 2022 in a sign of growing apprehension around the US economy.
A strange seasonal impact might also drive unexpected moves tonight.
The August jobs report has historically been volatile with the initial numbers often below forecasts before later being revised higher. The August US jobs report has only beaten expectations on two occasions over the last decade. The impact of summer hiring, especially in auto production, and delays in returning survey data, has been blamed.
Euro lower on ECB warning
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 28 August – 2 September
All times AEST
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