EUR/USD bulls step up and defend key terrotiry
- EUR/USD finds its footing in preparation for the big events ahead this week.
- The US dollar has given back a significant portion of Friday's bid as markets get set for the Fed.
EUR/USD recovered the end of month drop on Monday, rising from a low of 1.1546 to a fresh high of 1.1608 on the day as the greenback gives back a significant portion of Friday's bid. At the time of writing, EUR/USD is higher by some 0.37% as the focus switched from US data to the mid-week US Federal Reserve interest rate meeting.
For the pair, it is now a battle of the central banks and data as strong EU data is now starting to test the European Central Bank's dovish resolve. In contrast today, the US ISM Manufacturing index eased 0.3pts in October to 60.8, however arguably, it is still indicating a strong expansion in the manufacturing economy for the 17th consecutive month. Analysts at ANZ Bank explained that optimism about future growth prospects is high and positive growth comments outweighed cautious ones by a ratio of 4:1.
Meanwhile, the US dollar has eased on Monday versus its main rivals on Monday, after posting its biggest daily rise in more than four months in the previous session, as traders position themselves ahead of this week's highly anticipated US Federal Reserve policy meeting.
US jobs in focus
Additionally, the US labour market will be in focus this week as well. On Friday, the Nonfarm payrolls will take centre stage no matter the outcome of the Fed. ''However, the labour market has lagged notably behind, with the labour force as well as employment still down sharply from the pre-COVID level,'' analysts at TD Securities explained, adding that the reasons behind the labour-force gap are numerous but mostly virus-related.
''We remain of the view that persistent labour-market scarring stemming from the pandemic remains a low-probability scenario, as the recovery has been swifter than that post-2008-9. In turn, we continue to expect the Fed to remain patient while achieving the maximum employment goal set under its new policy framework.''