US labor market data revision expected to show overstated job creation, leading to downward DXY revision and EUR/USD rally. FOMC minutes also likely to support dovish Fed stance, further weakening USD.
Revision of US Labor Market Data
The revision of US labor market data is a much anticipated event by the market, as it is expected to show that job creation has been overstated since last summer. This could lead to a significant downward revision of the US Dollar Index (DXY) and a rally in the EUR/USD currency pair. Commerzbank’s FX Analyst Antje Praefcke notes that the revision could be the biggest since 2009, which is why the market is focusing so much on it.
Key points:
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- The revision is expected to show that job creation has been overstated since last summer.
- This could lead to a significant downward revision of the US Dollar Index (DXY).
- A downward revision of the DXY could lead to a rally in the EUR/USD currency pair.
- Commerzbank’s FX Analyst Antje Praefcke notes that the revision could be the biggest since 2009.
- If the revision shows that the labor market data had been overstated since last summer, the market could feel more confident in its assumption that the Fed will have to cut the key interest rate quickly and sharply, as the labor market has already cooled longer and more sharply than everyone had previously assumed.
Federal Open Market Committee (FOMC) Minutes
The FOMC minutes are released eight weeks after each meeting, and they provide insight into the thinking of the Federal Reserve policymakers. The markets are expecting the minutes to show that the Fed is dovish and that it is likely to cut interest rates in September. This could put further downward pressure on the USD and boost the EUR/USD. The FOMC minutes will be released on Wednesday, August 21st at 20:00 CET.
Key points:
- The FOMC minutes are released eight weeks after each meeting.
- The FOMC minutes provide insight into the thinking of the Federal Reserve policymakers.
- The markets are expecting the minutes to show that the Fed is dovish and that it is likely to cut interest rates in September.
- A dovish Fed could put further downward pressure on the USD and boost the EUR/USD.
- The FOMC minutes will be released on Wednesday, August 21st at 20:00 CET.
Outlook for the US Economy
The outlook for the US economy is a key factor in the currency markets. The markets are currently pricing in a slowdown in the US economy, and this is putting downward pressure on the USD. However, some analysts believe that the slowdown may not be as severe as the markets are currently expecting. The revision of US labor market data and the FOMC minutes are both supportive of a EUR/USD rally, as they suggest that the US economy is weakening and that the Fed is likely to cut interest rates.
Key points:
- The outlook for the US economy is a key factor in the currency markets.
- The markets are currently pricing in a slowdown in the US economy.
- A slowdown in the US economy could put downward pressure on the USD.
- Some analysts believe that the slowdown may not be as severe as the markets are currently expecting.
- The revision of US labor market data and the FOMC minutes are both supportive of a EUR/USD rally, as they suggest that the US economy is weakening and that the Fed is likely to cut interest rates.
Main Economic Events for this week:
- FOMC Minutes (Wednesday, August 21st at 18:00 GMT): This is arguably the most significant event of the week. The minutes from the Federal Reserve’s July meeting will provide insights into the central bank’s thinking and potential future policy moves. Impact: High, Currency: USD
- Jackson Hole Symposium (Thursday, August 22nd): This annual event features speeches from central bank officials, including Fed Chair Jerome Powell. Powell’s speech will be closely watched for clues about the Fed’s interest rate outlook. Impact: High, Currency: USD
- Nonfarm Payrolls Benchmark Revision (Wednesday, August 21st at 14:00 GMT): This revision will provide a more accurate picture of job growth in the US. A significant revision could impact the Fed’s rate hike expectations. Impact: Medium, Currency: USD
- HCOB Composite PMI (Thursday, August 22nd): This composite index measures the overall health of the Eurozone economy. A stronger-than-expected reading could support the Euro. Impact: High, Currency: EUR
- BoJ Governor Ueda Speech (Friday, August 23rd): The Bank of Japan Governor’s speech will provide insights into the central bank’s monetary policy stance. Any indications of a potential policy shift could impact the Yen. Impact: High, Currency: JPY
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