- EUR/USD falls to near 1.0900 on dismal market mood.
- The US Dollar declines as Fed rate cuts in September appear imminent.
- Middle East tensions grew as Iran launched missiles at Israel in retaliation to the killing of Hamas leader Ismail Haniyeh.
The EUR/USD pair slips to near the crucial support of 1.0900 in Monday’s European session. The major currency pair faces pressure as market sentiment turns extremely risk-averse due to Middle East tensions and the weak United States (US) Nonfarm Payrolls (NFP) report for July, which prompted fears of an economic recession.
S&P 500 futures have faced a bloodbath in Asian trading hours on Monday, exhibiting a sheer decline in investors’ risk-appetite. 10-year US Treasury yields post fresh annual lows near 3.67% as speculation over rate-cut decision from the Federal Reserve (Fed) in the September meeting appears to be a done deal.
The current situation in the Middle East points to an all-out war, as Iran-backed Hezbollah said it launched dozens of missiles at Israel. The move came in retaliation to the assassination of Hamas leader Ismail Haniyeh by an Israeli airstrike in Tehran.
Meanwhile, the NFP report on Friday showed that labor demand has slowed significantly. Employment numbers came in at 114K, lower than estimates of 175K and June’s reading of 179 K. The Unemployment Rate jumped to 4.3%, the highest since November 2021, from expectations and the prior release of 4.1%. The report clearly indicates that the labor market struggles to bear the consequences of higher interest rates by the Federal Reserve (Fed).
In Monday’s session, investors will focus on the US ISM Services PMI data for July, which will be published at 14:00 GMT. The report is expected to show that activities in the service sector expanded to 51.0 after contracting to 48.8 in June.
On the Eurozone front, higher preliminary Harmonized Index of Consumer Prices (HICP) for July has raised doubts over European Central Bank (ECB) September rate cuts.
Economic Indicator
Unemployment Rate
The Unemployment Rate, released by the US Bureau of Labor Statistics (BLS), is the percentage of the total civilian labor force that is not in paid employment but is actively seeking employment. The rate is usually higher in recessionary economies compared to economies that are growing. Generally, a decrease in the Unemployment Rate is seen as bullish for the US Dollar (USD), while an increase is seen as bearish. That said, the number by itself usually can't determine the direction of the next market move, as this will also depend on the headline Nonfarm Payroll reading, and the other data in the BLS report.
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