Euro under pressure ahead of key US data

On Thursday morning, September 24, the EUR/USD pair is trading in a narrow range of 1.1368-1.1386 dollars after a sharp decline on Wednesday. According to Forex.com, from the August high the euro has lost more than 2.9%, and the current dynamics remain bearish.

One of the main reasons for pressure on the euro remains the change in expectations regarding the monetary policy of the US Federal Reserve. After the September rate hike by the Fed to the range of 3.75–4.00%, investors are assessing the likelihood of further tightening of American policy.

The main attention of the market today will be focused on US labor market statistics. At 15:30 Kyiv time, data on initial jobless claims for the week ending September 19 will be released. The consensus forecast suggests about 201 thousand claims against 196 thousand a week earlier.

At the same time, data on continuing jobless claims will be released: expected around 1.735 million versus 1.730 million previously. The market will also receive information on building permits and new home sales in the US.

For the currency market, employment data will be especially important. If the number of jobless claims is significantly lower than forecasts, this will indicate the continued resilience of the US labor market. In that case, investors may have more reason to expect the Fed to maintain a tight policy, which could support the dollar.

Weak statistics, on the contrary, may strengthen expectations of a softer policy from the American regulator. This could provide support for EUR/USD.

In addition to statistics, today a number of speeches by Federal Reserve representatives are planned, including John Williams, Thomas Barkin and other heads of regional Fed banks.

Their comments will be especially closely monitored after the September Fed decision. Investors are primarily interested in the question: whether the current rate hike is a one-off step or the American regulator is ready to continue tightening monetary policy if inflation remains above the target level.

Expectations regarding the next Fed step are now one of the most important factors for the dollar.

For now, the situation is not in favor of the European currency. The US dollar is supported by hawkish expectations regarding Fed policy, and the euro came under additional technical pressure after several consecutive declines. Reuters previously noted an increase in demand for the dollar amid expectations of possible further Fed rate hikes.

Therefore, today's US statistics can cause a noticeable movement in EUR/USD.

Strong data on the US labor market and housing sector may lead to further strengthening of the dollar and increase pressure on the euro. Weak statistics, on the contrary, may trigger a dollar correction and a recovery in EUR/USD.

At the same time, the market reaction may be mixed: investors will compare economic data not only with current rate expectations, but also with statements by Fed representatives.

Thus, September 24 becomes another important day for EUR/USD. After the September Fed rate hike, the market has switched to searching for signals about the further trajectory of American monetary policy. Today such signals will primarily be unemployment data, housing market statistics and speeches by Fed representatives.