"Monetary policy remains the central variable. While markets expect the Fed to cut interest rates if U.S. economic data show sufficient cooling, the European Central Bank (ECB) is inclined to keep its deposit rate steady at 2%. This divergence allows the U.S.-Eurozone real yield spread to narrow, thereby providing short-term support for the euro."
"The ADP Non-Farm Employment report released on Thursday showed private-sector payrolls rising by only 54,000, well below expectations of 73,000 and sharply lower than the previous month's 106,000. In addition, JOLTS job openings weakened, reflecting a slowdown in hiring demand. However, the ISM Services PMI remained above 50, signaling continued expansion in the services sector, which accounts for the largest share of the U.S. economy. This suggests that the U.S. economy is slowing, particularly in the labor market, but has not yet entered recession."
"In the Eurozone, the economic picture is gradually improving but remains fragile. The manufacturing PMI has returned above the 50 threshold for the first time since early 2022, while the services sector continues to expand. Inflation has also moved close to the ECB's 2% target, reinforcing the view that the central bank need not rush into further easing. Nevertheless, GDP growth remains modest, and the region is still highly vulnerable to energy shocks."
EURUSD is caught between Fed easing expectations that support the euro via a narrowing U.S.-Eurozone real yield spread and a fragile Eurozone growth outlook that constrains gains. Markets expect potential Fed rate cuts if U.S. data cools, while the ECB is likely to hold the deposit rate at 2%. Recent U.S. data show weak private payrolls and softer job openings but ISM Services PMI above 50, indicating slowing labor markets without recession. Eurozone PMIs have improved and inflation nears 2%, yet GDP growth stays modest and energy vulnerabilities persist.
Read at London Business News | Londonlovesbusiness.com
Unable to calculate read time
Collection
[
|
...
]