Euro holds early recovery against US Dollar, focus is on ECB policy

The Euro holds the recovery move near 1.1450 against the US Dollar.
The ECB and the Fed are expected to leave interest rates unchanged in the July meeting.
Escalating Middle East tensions continue to weigh on market sentiment.

Sagar Dua FXStreet

The Euro (EUR) holds its early recovery move at around 1.1450 against the US Dollar (USD) during the European trading session on Monday. The major currency pair rebounds as the US Dollar turns upside down amid firm expectations that the Federal Reserve (Fed) will keep interest rates steady in the July policy meeting.

At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.1% lower to near 100.65.

According to the CME FedWatch tool, the odds of the Fed leaving interest rates unchanged in the July meeting are 85.6%, up from 65.8% recorded last week. Traders scaled back hawkish Fed expectations after the release of the softer-than-expected United States (US) Consumer Price Index (CPI) data for June.

Though the Euro trades higher against the US Dollar, the former is underperforming against its other peers amid escalating geopolitical tensions. US Central Command (CENTCOM) confirmed late Sunday that it had concluded a ninth straight night of strikes against Iran, clarifying that the latest aggression was in retaliation for the killing of at least three American service members.

This week, the major trigger for the Euro will be the European Central Bank’s (ECB) monetary policy announcement on Thursday. The central bank is expected to leave policy rates unchanged after raising them by 25 basis points (bps) in the June meeting. Investors will pay close attention to the ECB’s monetary policy statement and President Christine Lagarde’s speech to get fresh cues regarding the monetary policy outlook.

Economic Indicator

ECB Rate On Deposit Facility

One of the European Central Bank's three key interest rates, the rate on the deposit facility, is the rate at which banks earn interest when they deposit funds with the ECB. It is announced by the European Central Bank at each of its eight scheduled annual meetings.

USD/JPY eyes August swing low, near 155.20 ahead of US NFP

USD/JPY retests the August monthly swing low during the Asian session on Friday as a more hawkish repricing of BoJ rate-hike bets and a suspected intervention continue to underpin the Japanese Yen. Meanwhile, the US Dollar is seen consolidating the previous day's heavy losses amid soft US bond yields, further weighing on the currency pair as traders keenly await the US NFP report.

AUD/USD consolidates above 0.7200; US NFP awaited

AUD/USD holds steady above 0.7200, near its highest level since mid-May, as bulls await the US NFP report for more cues on the Fed's policy path before placing fresh bets. Meanwhile, the recent decline in US bond yields keeps the US Dollar depressed near its lowest level in over a week and acts as a tailwind for the Aussie amid the RBA's hawkish tilt.

Gold bulls seem hesitant below $4,500 amid modest USD bounce ahead of US NFP

Gold remains on the defensive below the $4,500 mark through the Asian session, snapping a two-day winning streak amid a modest US Dollar uptick. The commodity, however, remains close to the weekly high, which it touched the previous day, as traders keenly await the release of the closely watched US monthly employment details. The popularly known US Nonfarm Payrolls (NFP) report will provide more cues about the Fed's policy path amid receding bets of a September rate hike.

Bitcoin clears $80,000 on reduced rate hike odds – Zcash, Ethena rise

Bitcoin is trading above $80,000 on Friday, sustaining the broader cryptocurrency market's risk-on sentiment. Federal Reserve (Fed) Governor Christopher Waller signaled support for a potential pause in interest rates on Thursday, lowering the odds of a September rate hike to 50%. Zcash (ZEC) and Ethena (ENA) emerge as top performers over the last 24 hours.

NFP preview: Can jobs data ease rate hike fears?

As we move to the end of the week, the focus shifts to the macro data, and to the strength of the labour market in the US. August payrolls are released on Friday at 1330 BST, and the market is expecting a reading of 58k. The unemployment rate is expected to remain steady at 4.1% and wage growth is expected to moderate slightly to 3% last month, down from 3.2%.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.